PAR PACIFIC HOLDINGS, INC. 10-Q

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview We are a growth-oriented company based in Houston, Texas, that owns and operates market-leading energy and infrastructure businesses. Our business is organized into three primary segments: 1) Refining - We own and operate four refineries with total throughput capacity of over 200 Mbpd 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 . Laramie Energy is focused on producing natural gas in Garfield, Mesa, and Rio Blanco Counties, Colorado. We have four reportable segments: (i) Refining , (ii) Retail , (iii) Logistics , and (iv) Corporate and Other. Our Corporate and Other reportable segment primarily includes general and administrative costs. Please read Note 18—Segment Information to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for detailed information on our operating results by segment. Recent Events Affecting Comparability of Periods On March 11, 2020, the World Health Organization (“WHO”) declared that the worldwide spread and severity of a new coronavirus, referred to as COVID-19, was severe enough to be characterized as a pandemic. The spread of COVID-19, in conjunction with related government and other preventative measures taken to mitigate the spread of the virus, has caused severe disruptions in the worldwide economy, including the global demand for crude oil and refined products, the movement of people and goods in the United States, and the global supply chain for industrial and commercial production, all of which have in turn disrupted our businesses and operations. We continue to actively respond to the impacts that these matters are having on our business. We decreased throughput rates at our Hawaii and Wyoming refineries in response to reduced refined product demand, idled certain refining units at our Hawaii refineries, reduced the scope of our Washington turnaround scheduled in the first quarter of 2021, and delayed the timing of our planned turnaround in Hawaii until the third quarter of 2020. In addition, we have adjusted production of certain refined products to meet the changing local demand profile. We continue to maintain an ample supply of refined product to meet the refined product needs in the regions in which we operate. On May 5, 2020 , we announced that 29 employees were furloughed in response to the previously announced decline in throughput rates at our refineries in Kapolei, Hawaii, and our President and Chief Executive Officer and the independent members of the Company’s Board of Directors reduced their cash salaries by 75% . In response to sustained decreased demand for refined products in Hawaii, we significantly reduced discretionary spending company-wide and, in early October 2020 , we reduced headcount in our refining segment in Hawaii. In addition, we are taking measures to address our liquidity, including deferring or delaying certain capital expenditures originally planned for 2020 and early 2021 related to turnaround activities at three of our refineries and, in early June 2020, accessing the capital markets to issue $105 million aggregate principal amount of senior secured notes due 2026 . Interest rates associated with our inventory financing arrangements and borrowings under those inventory financing arrangements have also declined. We believe the steps we have taken have strengthened our ability to conduct our operations through current conditions. We are also utilizing some of the tax payment deferral opportunities and federal refund acceleration opportunities provided by the IRS, Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), and various state-specific provisions. We continue to maintain existing processes and procedures, including but not limited to processes and procedures around protection of our technology systems and proprietary data, even though a significant number of our employees are working from home. During this 32 time of uncertainty, the health and wellbeing of our employees and customers are our top priorities as we continue navigating the challenges presented by the COVID-19 pandemic. The financial results contained in this Quarterly Report on Form 10-Q reflect the reduced activity experienced in the second and third quarters of 2020 in the regions in which we operate. The COVID-19 pandemic is ongoing and the impacts of the virus on people and businesses continue to evolve as of the date of this report. In Washington, for example, mandatory self-quarantine orders have been lifted and replaced by recommended self-quarantines for travelers arriving from areas of high COVID-19 activity. Beginning October 15, 2020, U.S. travelers to the state of Hawaii have an option to take a rapid COVID-19 test as an alternative to a 14-day quarantine. If travelers test negative, they will not be required to quarantine. Prohibitions on international travel to the U.S. have been extended into the fourth quarter of 2020. We continue to actively monitor the impact of the global situation on our people, operations, financial condition, liquidity, suppliers, customers, and industry. Due to the rapid development and fluidity of the situation, the full magnitude of the impact of COVID-19 on our financial condition, future results of operations, and future cash flows and liquidity is uncertain and has been and may continue to be material. Results of Operations Three months ended September 30, 2020 compared to the three months ended September 30, 2019 Net Loss . Our financial results for the third quarter of 2020 improved from a net loss of $83.9 million for the three months ended September 30, 2019 to a net loss of $14.3 million for the three months ended September 30, 2020 . The increase was primarily driven by our 2019 other-than-temporary impairment of $81.5 million related to our equity investment in Laramie Energy, partially offset by unfavorable refining crack spreads, lower retail sales volumes related to COVID-19 demand destruction, and an approximately $6.2 million increase in expense from an expected liquidation of a LIFO inventory layer. Other factors impacting our results period over period include cost reductions across our businesses in response to COVID-19, partially offset by an increase in RINs expenses and a $5.5 million unfavorable change in lower of cost or net realizable value adjustments. Adjusted EBITDA and Adjusted Net Income (Loss) . For the three months ended September 30, 2020 , Adjusted EBITDA was a loss of $16.1 million compared to earnings of $47.0 million for the three months ended September 30, 2019 . The decrease was primarily related to unfavorable crack spreads and lower sales volumes across our operating segments related to COVID-19 demand destruction, partially offset by favorable crude oil differentials in Hawaii and cost reductions across our businesses in response to COVID-19. For the three months ended September 30, 2020 , Adjusted Net Income (Loss) was a loss of $56.5 million compared to income of $4.0 million for the three months ended September 30, 2019 . The decrease was primarily related to the factors described above for the decrease in Adjusted EBITDA, partially offset by a $2.2 million decrease in our Equity earnings from Laramie Energy, excluding our share of unrealized gains or losses on derivatives and excluding impairment changes associated with our investment in Laramie Energy. Nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 Net Income (Loss) . Our net income decreased from $5.4 million for the nine months ended September 30, 2019 to a net loss of $277.2 million for the nine months ended September 30, 2020 . The decrease was primarily driven by unfavorable crack spreads, goodwill impairments of $67.9 million , increased RINs expenses and derivative costs, and an unfavorable change in lower of cost or net realizable value adjustments, partially offset by cost reductions across our businesses in response to COVID-19 and higher retail fuel margins. In addition, we incurred an other-than-temporary impairment of $45.3 million related to our equity investment in Laramie Energy in 2020, as compared to an other-than-temporary impairment of $81.5 million in 2019. Other factors impacting our results period over period include a $48.1 million reduction in our income tax benefit, lower debt extinguishment and commitment costs, and an approximately $6.2 million increase in expense from an expected liquidation of a LIFO inventory layer. Adjusted EBITDA and Adjusted Net Income (Loss) . For the nine months ended September 30, 2020 , Adjusted EBITDA was a loss of $52.7 million compared to earnings of $166.0 million for the nine months ended September 30, 2019 . The change was primarily related to unfavorable crack spreads and lower refining sales volumes at our Hawaii and Wyoming refineries related to COVID-19 demand destruction, partially offset by lower operating expense and higher retail fuel margins. For the nine months ended September 30, 2020 , Adjusted Net Income (Loss) was a loss of $174.5 million compared to income of $35.7 million for the nine months ended September 30, 2019 . The decrease was primarily related to the same factors described above for the decrease in Adjusted EBITDA, partially offset by a $4.7 million decrease in interest expense and financing costs and a $3.7 million decrease in our Equity earnings from Laramie Energy, excluding our share of unrealized gains or losses on derivatives and excluding impairment changes associated with our investment in Laramie Energy. The following tables summarize our consolidated results of operations for the three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019 (in thousands). The following should be read in conjunction with our condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report. Three Months Ended September 30, 2020 2019 $ Change % Change (1) Revenues $ 689,981 $ 1,401,638 $ (711,657 ) (51 )% Cost of revenues (excluding depreciation) 585,289 1,265,755 (680,466 ) (54 )% Operating expense (excluding depreciation) 69,458 83,237 (13,779 ) (17 )% Depreciation, depletion, and amortization 22,821 22,227 594 3 % General and administrative expense (excluding depreciation) 9,818 11,391 (1,573 ) (14 )% Acquisition and integration costs (155 ) 623 (778 ) (125 )% Total operating expenses 687,231 1,383,233 Operating income 2,750 18,405 Other income (expense) Interest expense and financing costs, net (17,523 ) (18,348 ) 825 4 % Other income, net 610 83 527 635 % Change in value of common stock warrants — (826 ) 826 100 % Equity losses from Laramie Energy, LLC — (85,633 ) 85,633 100 % Total other income (expense), net (16,913 ) (104,724 ) Loss before income taxes (14,163 ) (86,319 ) Income tax benefit (expense) (108 ) 2,428 (2,536 ) (104 )% Net loss $ (14,271 ) $ (83,891 ) 33 Nine Months Ended September 30, 2020 2019 $ Change % Change (1) Revenues $ 2,409,365 $ 4,002,382 $ (1,593,017 ) (40 )% Cost of revenues (excluding depreciation) 2,236,778 3,578,329 (1,341,551 ) (37 )% Operating expense (excluding depreciation) 209,876 231,741 (21,865 ) (9 )% Depreciation, depletion, and amortization 66,232 65,103 1,129 2 % Impairment expense 67,922 — 67,922 NM General and administrative expense (excluding depreciation) 31,823 34,435 (2,612 ) (8 )% Acquisition and integration costs 600 4,325 (3,725 ) (86 )% Total operating expenses 2,613,231 3,913,933 Operating income (loss) (203,866 ) 88,449 Other income (expense) Interest expense and financing costs, net (52,611 ) (57,336 ) 4,725 8 % Debt extinguishment and commitment costs — (9,186 ) 9,186 100 % Other income, net 1,089 2,347 (1,258 ) (54 )% Change in value of common stock warrants 4,270 (3,065 ) 7,335 239 % Equity losses from Laramie Energy, LLC (46,905 ) (84,841 ) 37,936 45 % Total other income (expense), net (94,157 ) (152,081 ) Loss before income taxes (298,023 ) (63,632 ) Income tax benefit 20,855 69,002 (48,147 ) (70 )% Net income (loss) $ (277,168 ) $ 5,370 ________________________________________________________ (1) NM - Not meaningful The following tables summarize our operating income (loss) by segment for the three and nine months ended September 30, 2020 and 2019 (in thousands). The following should be read in conjunction with our condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report. 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 34 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 ________________________________________________________ (1) Includes eliminations of intersegment Revenues and Cost of revenues (excluding depreciation) 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 ) 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 ________________________________________________________ (1) Includes eliminations of intersegment Revenues and Cost of revenues (excluding depreciation) of $237.7 million and $316.0 million for the nine months ended September 30, 2020 and 2019 , respectively. 35 Below is a summary of key operating statistics for the refining segment for the three and nine months ended September 30, 2020 and 2019 : Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Total Refining Segment Feedstocks Throughput (Mbpd) (1) 105.0 150.7 124.0 161.9 Refined product sales volume (Mbpd) (1) 125.0 184.5 141.2 175.1 Hawaii Refineries Combined Feedstocks Throughput (Mbpd) 51.2 95.4 70.9 108.1 Par East Throughput (Mbpd) 51.2 67.9 62.5 72.0 Par West Throughput (Mbpd) — 27.5 8.4 36.1 Yield (% of total throughput) Gasoline and gasoline blendstocks 23.1 % 23.5 % 23.6 % 23.1 % Distillates 31.0 % 44.2 % 41.1 % 43.9 % Fuel oils 41.0 % 26.6 % 29.6 % 26.6 % Other products (0.7 )% 1.4 % 1.3 % 2.9 % Total yield 94.4 % 95.7 % 95.6 % 96.5 % Refined product sales volume (Mbpd) On-island sales volume 67.6 112.4 85.3 111.0 Exports sales volume 2.5 12.5 0.8 6.9 Total refined product sales volume 70.1 124.9 86.1 117.9 Adjusted Gross Margin per bbl ($/throughput bbl) (2) $ (0.47 ) $ 0.98 $ (2.17 ) $ 2.82 Production costs per bbl ($/throughput bbl) (3) 5.80 4.17 4.30 3.22 DD&A per bbl ($/throughput bbl) 0.64 0.50 0.45 0.45 Washington Refinery Feedstocks Throughput (Mbpd) (1) 40.5 38.2 39.1 38.2 Yield (% of total throughput) Gasoline and gasoline blendstocks 22.6 % 22.9 % 23.3 % 23.7 % Distillates 34.6 % 35.1 % 35.3 % 35.6 % Asphalt 19.4 % 20.9 % 19.0 % 18.8 % Other products 20.7 % 18.5 % 19.6 % 19.4 % Total yield 97.3 % 97.4 % 97.2 % 97.5 % Refined product sales volume (Mbpd) (1) 42.0 41.4 40.9 41.1 Adjusted Gross Margin per bbl ($/throughput bbl) (2) $ 2.16 $ 10.56 $ 5.36 $ 10.07 Production costs per bbl ($/throughput bbl) (3) 3.40 4.40 3.51 4.55 DD&A per bbl ($/throughput bbl) 1.29 1.42 1.40 1.59 36 Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Wyoming Refinery Feedstocks Throughput (Mbpd) 13.3 17.1 14.0 17.0 Yield (% of total throughput) Gasoline and gasoline blendstocks 48.2 % 46.7 % 48.5 % 49.0 % Distillates 46.2 % 47.1 % 46.1 % 44.8 % Fuel oils 1.9 % 1.8 % 1.9 % 1.8 % Other products 1.6 % 1.9 % 1.4 % 1.9 % Total yield 97.9 % 97.5 % 97.9 % 97.5 % Refined product sales volume (Mbpd) 12.9 18.2 14.2 17.6 Adjusted Gross Margin per bbl ($/throughput bbl) (2) $ 8.53 $ 25.65 $ 4.35 $ 19.06 Production costs per bbl ($/throughput bbl) (3) 7.51 6.33 7.22 6.49 DD&A per bbl ($/throughput bbl) 4.65 2.97 4.03 2.86 Market Indices ($ per barrel) 3-1-2 Singapore Crack Spread (4) $ 1.92 $ 12.41 $ 3.29 $ 10.33 Pacific Northwest 5-2-2-1 Index (5) 9.39 14.76 11.51 14.47 Wyoming 3-2-1 Index (6) 19.63 27.32 17.63 23.81 Crude Prices ($ per barrel) Brent $ 43.34 $ 62.03 $ 42.52 $ 64.77 WTI 40.92 56.44 38.31 57.09 ANS 43.11 63.63 41.19 65.71 Bakken Clearbrook 39.44 55.32 35.59 56.22 WCS Hardisty 30.93 43.61 25.78 45.07 Brent M1-M3 (0.79 ) 1.10 (1.17 ) 0.87 ________________________________________________________ (1) Feedstocks throughput and sales volumes per day for the Washington refinery for the three and nine months ended September 30, 2019 are calculated based on the 92 and 263 -day periods for which we owned the Washington refinery in 2019, respectively. As such, the amounts for the total refining segment represent the sum of the Hawaii and Wyoming refineries’ throughput or sales volumes averaged over the three and nine months ended September 30, 2019 plus the Washington refinery’s throughput or sales volumes averaged over the periods from July 1, 2019 to September 30, 2019 and January 11, 2019 to September 30, 2019 , respectively. The 2020 amounts for the total refining segment represent the sum of the Hawaii, Washington, and Wyoming refineries’ throughput or sales volumes averaged over the three and nine months ended September 30, 2020 . (2) We calculate Adjusted Gross Margin per barrel by dividing Adjusted Gross Margin by total refining throughput. Adjusted Gross Margin for our Washington refinery is determined under the last-in, first-out (“LIFO”) inventory costing method. Adjusted Gross Margin for our other refineries is determined under the first-in, first-out (“FIFO”) inventory costing method. Please see discussion of Adjusted Gross Margin below. (3) Management uses production costs per barrel to evaluate performance and compare efficiency to other companies in the industry. There are a variety of ways to calculate production costs per barrel; different companies within the industry calculate it in different ways. We calculate production costs per barrel by dividing all direct production costs, which include the costs to run the refineries including personnel costs, repair and maintenance costs, insurance, utilities, and other miscellaneous costs, by total refining throughput. Our production costs are included in Operating expense (excluding depreciation) on our condensed consolidated statement of operations, which also includes costs related to our bulk marketing operations. 37 (4) After completing the acquisition of the Par West Hawaii refinery in December 2018, we began shifting our Hawaii production profile to supply the local utilities with low sulfur fuel oil and significantly reduced our high sulfur fuel oil yield. In 2020, following the implementation of IMO 2020, we established the 3-1-2 Singapore Crack Spread (or three barrels of Brent crude oil converted into one barrel of gasoline and two barrels of distillates (diesel and jet fuel)) as a new benchmark for our Hawaii operations. By removing the high sulfur fuel oil reference in the index, we believe the 3-1-2 Singapore Crack Spread is the most representative market indicator of our current operations in Hawaii. (5) We believe the Pacific Northwest 5-2-2-1 Index is the most representative market indicator for our operations in Tacoma, Washington. The Pacific Northwest 5-2-2-1 Index is computed by taking two parts gasoline (sub-octane), two parts middle distillates (ULSD and jet fuel), and one part fuel oil as created from five barrels of Alaskan North Slope (“ANS”) crude oil. The 2019 price for the three and nine months ended September 30, 2019 represents the price averaged over the periods from July 1, 2019 to September 30, 2019 and January 11, 2019 to September 30, 2019 , respectively. (6) The profitability of our Wyoming refinery is heavily influenced by crack spreads in nearby markets. We believe the Wyoming 3-2-1 Index is the most representative market indicator for our operations in Wyoming. The Wyoming 3-2-1 Index is computed by taking two parts gasoline and one part distillates (ULSD) as created from three barrels of West Texas Intermediate Crude Oil (“WTI”). Pricing is based 50% on applicable product pricing in Rapid City, South Dakota, and 50% on applicable product pricing in Denver, Colorado. Below is a summary of key operating statistics for the retail segment for the three and nine months ended September 30, 2020 and 2019 : Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Retail Segment Retail sales volumes (thousands of gallons) 25,936 32,786 76,964 94,330 Non-GAAP Performance Measures Management uses certain financial measures to evaluate our operating performance that are considered non-GAAP financial measures. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP and our calculations thereof may not be comparable to similarly titled measures reported by other companies. Adjusted Gross Margin Adjusted Gross Margin is defined as (i) operating income (loss) plus operating expense (excluding depreciation); impairment expense; inventory valuation adjustment (which adjusts for timing differences to reflect the economics of our inventory financing agreements, including lower of cost or net realizable value adjustments, the impact of the embedded derivative repurchase and terminal obligations, and purchase price allocation adjustments); depreciation, depletion, and amortization (“DD&A”); Renewable Identification Numbers (“RINs”) loss (gain) in excess of net obligation (which represents the income statement effect of reflecting our RINs liability on a net basis); and unrealized loss (gain) on derivatives or (ii) revenues less cost of revenues (excluding depreciation) plus inventory valuation adjustment, unrealized loss (gain) on derivatives, and RINs loss (gain) in excess of net obligation. We define cost of revenues (excluding depreciation) as 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 RINs and environmental credit obligations, and certain hydrocarbon fees and taxes. Cost of revenues (excluding depreciation) also includes the unrealized gain (loss) on derivatives and the inventory valuation adjustment that we exclude from Adjusted Gross Margin. Beginning in the second quarter of 2020, Adjusted Gross Margin also includes the contango gains and backwardation losses associated with our Washington inventory and intermediation obligation. Prior to the second quarter of 2020, contango gains and backwardation losses captured by our Washington intermediation agreement were excluded from Adjusted Gross Margin (as part of the inventory valuation adjustment). This change to our non-GAAP information was made to reflect the favorable or unfavorable impact of the market structure on the profitability of our Washington refinery consistent with the presentation of such impacts on our other refineries. Beginning in the third quarter of 2020, Adjusted Gross Margin excludes the LIFO layer liquidation impacts associated with our Washington inventory. We have recast the non-GAAP information for the three and nine months ended September 30, 2019 to conform to the current period presentation. Management believes Adjusted Gross Margin is an important measure of operating performance and uses Adjusted Gross Margin per barrel to evaluate operating performance and compare profitability to other companies in the industry and to industry benchmarks. Management believes Adjusted Gross Margin provides useful information to investors because it eliminates the gross 38 impact of volatile commodity prices and adjusts for certain non-cash items and timing differences created by our inventory financing agreements and lower of cost or net realizable value adjustments to demonstrate the earnings potential of the business before other fixed and variable costs, which are reported separately in Operating expense (excluding depreciation) and Depreciation, depletion, and amortization . Adjusted Gross Margin should not be considered an alternative to operating income (loss), cash flows from operating activities, or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted Gross Margin presented by other companies may not be comparable to our presentation since each company may define this term differently as they may include other manufacturing costs and depreciation expense in cost of revenues. The following tables present a reconciliation of Adjusted Gross Margin to the most directly comparable GAAP financial measure, operating income (loss), on a historical basis, for selected segments, for the periods indicated (in thousands): Three months ended September 30, 2020 Refining Logistics Retail Operating income (loss) $ (5,106 ) $ 6,434 $ 12,060 Operating expense (excluding depreciation) 49,972 3,364 16,122 Depreciation, depletion, and amortization 13,509 5,513 2,829 Inventory valuation adjustment (43,980 ) — — LIFO liquidation adjustment 6,211 — — RINs loss in excess of net obligation 645 — — Unrealized gain on derivatives (4,952 ) — — Adjusted Gross Margin (1) $ 16,299 $ 15,311 $ 31,011 Three months ended September 30, 2019 Refining Logistics Retail Operating income $ 3,253 $ 13,560 $ 14,437 Operating expense (excluding depreciation) 63,041 2,553 17,643 Depreciation, depletion, and amortization 14,088 4,798 2,523 Inventory valuation adjustment 22,091 — — LIFO liquidation adjustment — — — RINs gain in excess of net obligation (1,240 ) — — Unrealized gain on derivatives (15,154 ) — — Adjusted Gross Margin (1) $ 86,079 $ 20,911 $ 34,603 Nine months ended September 30, 2020 Refining Logistics Retail Operating income (loss) $ (210,433 ) $ 31,513 $ 10,131 Operating expense (excluding depreciation) 151,601 9,882 48,393 Depreciation, depletion, and amortization 39,209 16,082 8,292 Impairment expense 38,105 — 29,817 Inventory valuation adjustment (4,635 ) — — LIFO liquidation adjustment 6,211 — — RINs loss in excess of net obligation 17,985 — — Unrealized gain on derivatives (4,507 ) — — Adjusted Gross Margin $ 33,536 $ 57,477 $ 96,633 39 Nine months ended September 30, 2019 Refining Logistics Retail Operating income $ 50,801 $ 42,350 $ 36,527 Operating expense (excluding depreciation) 173,689 7,945 50,107 Depreciation, depletion, and amortization 42,579 12,683 7,429 Inventory valuation adjustment 3,287 — — LIFO liquidation adjustment — — — RINs gain in excess of net obligation (3,039 ) — — Unrealized loss on derivatives 5,523 — — Adjusted Gross Margin (1) $ 272,840 $ 62,978 $ 94,063 ________________________________________ (1) For the three months ended September 30, 2020 and the three and nine months ended September 30, 2019 , there was no impairment expense recorded in Operating income (loss). Adjusted Net Income (Loss) and Adjusted EBITDA Adjusted Net Income (Loss) is defined as Net income (loss) excluding changes in the value of contingent consideration and common stock warrants, acquisition and integration costs, unrealized (gain) loss on derivatives, debt extinguishment and commitment costs, increase in (release of) tax valuation allowance and other deferred tax items, inventory valuation adjustment, severance costs, impairment expense, (gain) loss on sale of assets, Par’s share of Laramie Energy’s unrealized loss (gain) on derivatives, RINs loss (gain) in excess of net obligation, and impairment expense associated with our investment in Laramie Energy and our share of Laramie Energy ’s asset impairment losses in excess of our basis difference. Beginning in the second quarter of 2020, Adjusted Net Income (Loss) also includes the contango gains and backwardation losses associated with our Washington inventory and intermediation obligation. Prior to the second quarter of 2020, contango gains and backwardation losses captured by our Washington intermediation agreement were excluded from Adjusted Net Income (as part of the inventory valuation adjustment). This change to our non-GAAP information was made to reflect the favorable or unfavorable impact of the market structure on the profitability of our Washington refinery consistent with the presentation of such impacts on our other refineries. Beginning in the third quarter of 2020, Adjusted Net Income (Loss) excludes the LIFO layer liquidation impacts associated with our Washington inventory. We have recast the non-GAAP information for the three and nine months ended September 30, 2019 to conform to the current period presentation. Adjusted EBITDA is Adjusted Net Income (Loss) excluding interest expense and financing costs, income taxes, DD&A, and equity losses (earnings) from Laramie Energy, excluding Par’s share of unrealized loss (gain) on derivatives, the impairment of Par’s investment, and our share of Laramie Energy ’s asset impairment losses in excess of our basis difference. We believe Adjusted Net Income (Loss) and Adjusted EBITDA are useful supplemental financial measures that allow investors to assess: • The financial performance of our assets without regard to financing methods, capital structure, or historical cost basis; • The ability of our assets to generate cash to pay interest on our indebtedness; and • Our operating performance and return on invested capital as compared to other companies without regard to financing methods and capital structure. Adjusted Net Income (Loss) and Adjusted EBITDA should not be considered in isolation or as a substitute for operating income (loss), net income (loss), cash flows provided by operating, investing, and financing activities, or other income or cash flow statement data prepared in accordance with GAAP. Adjusted Net Income (Loss) and Adjusted EBITDA presented by other companies may not be comparable to our presentation as other companies may define these terms differently. 40 The following table presents a reconciliation of Adjusted Net Income (Loss) and Adjusted EBITDA to the most directly comparable GAAP financial measure, Net income (loss) , on a historical basis for the periods indicated (in thousands): 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 Inventory valuation adjustment (43,980 ) 22,091 (4,635 ) 3,287 LIFO liquidation adjustment 6,211 — 6,211 — RINs loss (gain) in excess of net obligation 645 (1,240 ) 17,985 (3,039 ) Unrealized loss (gain) on derivatives (4,952 ) (15,154 ) (4,507 ) 5,523 Acquisition and integration costs (155 ) 623 600 4,325 Debt extinguishment and commitment costs — — — 9,186 Changes in valuation allowance and other deferred tax items (1) — (2,751 ) (21,087 ) (70,420 ) Change in value of common stock warrants — 826 (4,270 ) 3,065 Severance costs — — 245 — Impairment expense — — 67,922 — Impairment of Investment in Laramie Energy, LLC (2) — 81,515 45,294 81,515 Par’s share of Laramie Energy’s unrealized loss (gain) on derivatives (2) — 1,961 (1,110 ) (3,129 ) Adjusted Net Income (Loss) (3) (56,502 ) 3,980 (174,520 ) 35,683 Depreciation, depletion, and amortization 22,821 22,227 66,232 65,103 Interest expense and financing costs, net 17,523 18,348 52,611 57,336 Equity losses (earnings) from Laramie Energy, LLC, excluding Par’s share of unrealized loss (gain) on derivatives and impairment losses — 2,157 2,721 6,455 Income tax expense 108 323 232 1,418 Adjusted EBITDA $ (16,050 ) $ 47,035 $ (52,724 ) $ 165,995 ________________________________________ (1) Includes increases in (releases of) our valuation allowance associated with business combinations and changes in deferred tax assets and liabilities that are not offset by a change in the valuation allowance. These tax expenses (benefits) are included in Income tax benefit (expense) on our condensed consolidated statements of operations. (2) Included in Equity losses from Laramie Energy, LLC on our condensed consolidated statements of operations. (3) For the three and nine months ended September 30, 2020 and 2019 , there was no (gain) loss on sale of assets or change in value of contingent consideration. Factors Impacting Segment Results Three months ended September 30, 2020 compared to the three months ended September 30, 2019 Refining. Operating loss for our refining segment was $5.1 million for the three months ended September 30, 2020 , a decrease of $8.4 million compared to operating income of $3.3 million for the three months ended September 30, 2019 . The decrease in profitability was primarily driven by unfavorable crack spreads at our Hawaii, Wyoming, and Washington refineries, partially offset by favorable crude oil differentials in Hawaii and operating expense reductions across our refineries in response to COVID-19. Other factors impacting our results period over period include an increase in RINs expenses, a $5.5 million unfavorable change in lower of cost or net realizable value adjustments, and a $6.2 million unfavorable impact from the liquidation of a LIFO inventory layer in Washington. Logistics. Operating income for our logistics segment was $6.4 million for the three months ended September 30, 2020 , a decrease of $7.2 million compared to operating income of $13.6 million for the three months ended September 30, 2019 . The decrease is due to a net 42% and 23% lower throughput across our Hawaii and Wyoming logistics assets, respectively, primarily due to decreased demand as a result of the COVID-19 pandemic and higher operating expense and DD&A. 41 Retail. Operating income for our retail segment was $12.1 million for the three months ended September 30, 2020 , a decrease of $2.3 million compared to operating income of $14.4 million for the three months ended September 30, 2019 . The decrease was primarily due to a 21% decline in sales volumes, partially offset by an 8% increase in fuel margins. Nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 Refining. Operating loss for our refining segment was $210.4 million for the nine months ended September 30, 2020 , a decrease of $261.2 million compared to operating income of $50.8 million for the nine months ended September 30, 2019 . The decrease in profitability was primarily driven by lower refining sales volumes at our Hawaii and Wyoming refineries related to COVID-19 demand destruction, unfavorable crude oil differentials in Hawaii and Wyoming, and increased derivative costs and RINs expenses, goodwill impairment charges of $38.1 million , and unfavorable lower of cost or net realizable value adjustments of $22.3 million , partially offset by improved crude oil differentials in Washington and operating expense reductions across our refineries in response to COVID-19. Logistics. Operating income for our logistics segment was $31.5 million for the nine months ended September 30, 2020 , a decrease of $10.9 million compared to operating income of $42.4 million for the nine months ended September 30, 2019 . The decrease is primarily due to a net 28% and 15% lower throughput across our Hawaii and Wyoming logistics assets, respectively, related to COVID-19 demand destruction and higher DD&A, partially offset by increased throughput in Washington. Retail. Operating income for our retail segment was $10.1 million for the nine months ended September 30, 2020 , a decrease of $26.4 million compared to operating income of $36.5 million for the nine months ended September 30, 2019 . The decrease in profitability is primarily due to goodwill impairment charges of $29.8 million and a decline in sales volumes of 18% , partially offset by an increase in fuel margins of 27% . Adjusted Gross Margin Three months ended September 30, 2020 compared to the three months ended September 30, 2019 Refining. For the three months ended September 30, 2020 , our refining Adjusted Gross Margin was $16.3 million , a decrease of $69.8 million compared to $86.1 million for the three months ended September 30, 2019 . The decrease was primarily driven by a 32% decline in refining sales volumes and unfavorable crack spreads. Adjusted gross margin for the Hawaii refineries decreased from $0.98 per barrel during the three months ended September 30, 2019 to $(0.47) per barrel during the three months ended September 30, 2020 primarily due to unfavorable crack spreads and an increase in RINs expenses. Adjusted gross margin for the Wyoming refinery decreased $17.12 per barrel primarily due to a decrease in sales volume and unfavorable crack spreads and crude oil differentials. Adjusted gross margin for the Washington refinery decreased $8.40 per barrel primarily due to declining crack spreads and an increase in RINs expenses. Logistics. For the three months ended September 30, 2020 , our logistics Adjusted Gross Margin was $15.3 million , a decrease of $5.6 million compared to $20.9 million for the three months ended September 30, 2019 . The decrease is due to a net 42% and 23% lower throughput across our Hawaii and Wyoming logistics assets, respectively, primarily due to decreased demand as a result of the COVID-19 pandemic. Retail. For the three months ended September 30, 2020 , our retail Adjusted Gross Margin was $31.0 million , a decrease of $3.6 million when compared to $34.6 million for the three months ended September 30, 2019 . The decrease was primarily due to a 21% decline in sales volumes, partially offset by an 8% increase in fuel margins. Nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 Refining. For the nine months ended September 30, 2020 , our refining Adjusted Gross Margin was $33.5 million , a decrease of $239.3 million compared to $272.8 million for the nine months ended September 30, 2019 . The decrease was primarily due to a 19% decline in sales volumes and declines in crack spreads. Adjusted gross margin for the Hawaii refineries decreased from $2.82 per barrel in 2019 to $(2.17) per barrel in 2020 primarily due to 27% lower sales volumes, unfavorable crude oil differentials, and an increase in RINs expenses. Adjusted gross margin for the Wyoming refinery decreased $14.71 per barrel primarily due to a 19% decline in sales volumes, a decrease in crack spreads, and unfavorable crude oil differentials. Adjusted gross margin for the Washington refinery decreased $4.71 per barrel primarily due to unfavorable crack spreads and higher derivative costs and RINs expenses, partially offset by improved crude oil differentials. Logistics. For the nine months ended September 30, 2020 , our logistics Adjusted Gross Margin was $57.5 million , a decrease of $5.5 million compared to $63.0 million for the nine months ended September 30, 2019 . The decrease was primarily driven by 28% and 15% decreases in throughput in Hawaii and Wyoming, respectively, related to COVID-19 demand destruction. 42 Retail. For the nine months ended September 30, 2020 , our retail Adjusted Gross Margin of $96.6 million was relatively consistent with $94.1 million for the nine months ended September 30, 2019 . Discussion of Consolidated Results Three months ended September 30, 2020 compared to the three months ended September 30, 2019 Revenues. For the three months ended September 30, 2020 , revenues were $0.7 billion , a $0.7 billion decrease compared to $1.4 billion for the three months ended September 30, 2019 . The decrease was primarily due to a decrease of $0.7 billion in third-party refining segment revenue as a result of decreases in Brent and WTI crude oil prices and a 32.2% decrease in refining sales volumes related to COVID-19 demand destruction. Brent crude oil prices averaged $43.34 per barrel during the third quarter of 2020 compared to $62.03 per barrel during the third quarter of 2019 , with similar decreases experienced for WTI crude oil prices. Revenues at our retail segment decreased $30.5 million primarily due to a 21% decline in sales volumes and a 22% decline in fuel prices. Cost of Revenues (Excluding Depreciation). For the three months ended September 30, 2020 , cost of revenues (excluding depreciation) was $0.6 billion , a $0.7 billion decrease compared to $1.3 billion for the three months ended September 30, 2019 . The decrease was primarily driven by decreases in Brent and WTI crude oil prices and lower refining volumes related to COVID-19 demand destruction as discussed above. Cost of revenues at our retail segment decreased $26.9 million primarily due to lower fuel costs and a 21% decline in sales volumes. Operating Expense (Excluding Depreciation). For the three months ended September 30, 2020 , operating expense (excluding depreciation) was $69.5 million , a $13.7 million decrease when compared to $83.2 million for the three months ended September 30, 2019 . The decrease was primarily due to cost reductions across our businesses and the idling of certain refining units at our Hawaii refineries in response to COVID-19 demand destruction. Depreciation, Depletion, and Amortization . For the three months ended September 30, 2020 , DD&A was $22.8 million , which was relatively consistent with $22.2 million for the three months ended September 30, 2019 . General and Administrative Expense (Excluding Depreciation). For the three months ended September 30, 2020 , general and administrative expense (excluding depreciation) was approximately $9.8 million , a $1.6 million decrease when compared to $11.4 million for the three months ended September 30, 2019 . The decrease was primarily driven by a reduction in the use of outside services and COVID-19-related reductions in travel and employee costs. Acquisition and Integration Costs. Acquisition and integration costs for the three months ended September 30, 2020 and 2019 were immaterial. Interest Expense and Financing Costs, Net . For the three months ended September 30, 2020 , our interest expense and financing costs were $17.5 million , a $0.8 million decrease when compared to $18.3 million for the three months ended September 30, 2019 . The decrease was primarily driven by a $0.7 million decrease in interest expense and financing costs due to the exchange of a portion of our outstanding 5.00% Convertible Senior Notes during 2019, a decrease of $1.6 million due to reduced borrowings under our inventory financing agreements, and a decrease of $2.3 million due to the reduced principal and lower variable interest rates on our Term Loan B Facility and Retail Property Term Loan , net of the impact from our interest rate swap. These decreases were partially offset by interest expense of $3.6 million related to the 12.875% Senior Secured Notes issued in June 2020. Please read Note 9—Inventory Financing Agreements and Note 10—Debt to our condensed consolidated financial statements for further discussion on our inventory financing and indebtedness, respectively. Change in Value of Common Stock Warrants . For the three months ended September 30, 2019 , the change in value of common stock warrants resulted in a loss of approximately $0.8 million . During the three months ended September 30, 2020 , there was no change in value of common stock warrants. During January and March 2020 , one of our stockholders and its affiliates exercised the remaining 354,350 common stock warrants in exchange for 350,542 shares of common stock. 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. During the three months ended September 30, 2019 , our stock price increased from $20.52 per share as of June 30, 2019 to $22.86 per share as of September 30, 2019 . Equity Losses from Laramie Energy, LLC . For the three months ended September 30, 2020 , there were no equity earnings (losses) from Laramie Energy, compared to equity losses of $85.6 million for the three months ended September 30, 2019 . During the three months ended September 30, 2019, we recorded an impairment charge of $81.5 million due to the significant decline in natural gas prices over the second quarter of 2019 and continued deterioration in the third quarter of 2019. 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. Please read Note 3—Investment in Laramie Energy, LLC for further information. 43 Income Taxes. For the three months ended September 30, 2020 , we recorded an income tax expense of $0.1 million primarily related to current state income taxes. For the three months ended September 30, 2019 , we recorded an income tax benefit of $2.4 million primarily driven by a $2.8 million benefit associated with a partial release of our valuation allowance in connection with indefinite-lived deferred tax assets from interest expense carryforwards with no expiration. Nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 Revenues. For the nine months ended September 30, 2020 , revenues were $2.4 billion , a $1.6 billion decrease compared to $4.0 billion for the nine months ended September 30, 2019 . The decrease was primarily due to a decrease of $1.5 billion in third-party revenues at our refining segment primarily as a result of decreases in Brent and WTI crude oil prices and lower sales volumes related to COVID-19 demand destruction. Refined product sales volumes decreased 19% from 175.1 Mbpd in the nine months ended September 30, 2019 to 141.2 Mbpd in the nine months ended September 30, 2020 . Average Brent crude oil prices decreased from $64.77 per barrel in the nine months ended September 30, 2019 to $42.52 per barrel in the nine months ended September 30, 2020 , with similar decreases experienced for WTI crude oil prices. Revenues at our retail segment decreased $68.6 million primarily due to an 18% decline in sales volumes and a 16% decrease in fuel prices. Cost of Revenues (Excluding Depreciation). For the nine months ended September 30, 2020 , cost of revenues (excluding depreciation) was $2.2 billion , a $1.4 billion decrease compared to $3.6 billion for the nine months ended September 30, 2019 . The decrease was primarily due to decreases in Brent and WTI crude oil prices as discussed above and lower refining sales volumes related to COVID-19 demand destruction, partially offset by unfavorable crude oil differentials, higher RINs expenses, increased derivative costs, and an unfavorable lower of cost or net realizable value adjustment of $22.3 million . Cost of revenues at our retail segment decreased $71.3 million primarily due to lower fuel costs and an 18% decline in sales volumes. Operating Expense (Excluding Depreciation). For the nine months ended September 30, 2020 , operating expense (excluding depreciation) was $209.9 million , a decrease of $21.8 million compared to $231.7 million for the nine months ended September 30, 2019 . The decrease was primarily due to lower utilities and repairs and maintenance expenses and COVID-19-related reductions in travel, employee costs, and the use of outside services. Depreciation, Depletion, and Amortization . For the nine months ended September 30, 2020 , DD&A was $66.2 million , which was relatively consistent with $65.1 million for the nine months ended September 30, 2019 . Impairment Expense. During the nine months ended September 30, 2020 , we recorded goodwill impairment charges of $67.9 million related to our Refining and Retail segments. Please read Note 8—Goodwill to our condensed consolidated financial statements for further discussion on the goodwill impairment. There was no impairment expense for the nine months ended September 30, 2019 . General and Administrative Expense (Excluding Depreciation). For the nine months ended September 30, 2020 , general and administrative expense (excluding depreciation) was $31.8 million , a decrease of $2.6 million compared to $34.4 million for the nine months ended September 30, 2019 . The decrease was primarily due to COVID-19-related reductions in travel and employee costs and a reduction in the use of outside services. Acquisition and Integration Costs. For the nine months ended September 30, 2020 , we incurred $0.6 million of integration costs primarily related to the Washington Acquisition . For the nine months ended September 30, 2019 , we incurred $4.3 million of acquisition and integration costs related to the Washington Acquisition and the Par West Hawaii refinery acquisition. Interest Expense and Financing Costs, Net . For the nine months ended September 30, 2020 , our interest expense and financing costs were $52.6 million , a decrease of $4.7 million when compared to $57.3 million for the nine months ended September 30, 2019 . The decrease was primarily due to a $3.5 million decrease in interest expense and financing costs due to the exchange of a portion of our outstanding 5.00% Convertible Senior Notes during 2019, a decrease of $3.2 million due to reduced borrowings under our inventory financing agreements, and a decrease of $3.1 million due to the reduced principal and lower variable interest rates on our Term Loan B Facility and Retail Property Term Loan , net of the impact from our interest rate swap. These decreases were partially offset by interest expense of $4.6 million related to the 12.875% Senior Secured Notes issued in June 2020. Please read Note 9—Inventory Financing Agreements and Note 10—Debt to our condensed consolidated financial statements for further discussion on our inventory financing and indebtedness, respectively. Change in Value of Common Stock Warrants . For the nine months ended September 30, 2020 , the change in value of common stock warrants resulted in a gain of $4.3 million , a change of $7.4 million when compared to a loss of $3.1 million for the nine months ended September 30, 2019 . During January and March 2020 , one of our stockholders and its affiliates exercised the remaining 354,350 common stock warrants in exchange for 350,542 shares of common stock. We estimated the fair value of our outstanding common stock warrants and the income recognized upon exercise using the difference between the strike price of the warrant and the market price of our common stock. For the three months ended March 31, 2020, our stock price decreased 44 from $23.24 per share as of December 31, 2019 to $7.10 per share as of March 31, 2020. During the nine months ended September 30, 2019 , our stock price increased from $14.18 per share on December 31, 2018 to $22.86 per share on September 30, 2019 . Debt Extinguishment and Commitment Costs. For the nine months ended September 30, 2019 , our debt extinguishment and commitment costs were $9.2 million and primarily represented the commitment and other fees associated with the financing of the Washington Acquisition and the extinguishment costs associated with the repurchase and cancellation of a portion of our outstanding 5.00% Convertible Senior Notes . Please read Note 10—Debt to our condensed consolidated financial statements for further discussion. No such costs were incurred for the nine months ended September 30, 2020 . Equity Losses from Laramie Energy, LLC . For the nine months ended September 30, 2020 , equity losses from Laramie Energy were $46.9 million , a difference of $37.9 million compared to equity losses of $84.8 million for the nine months ended September 30, 2019 . During the three months ended March 31, 2020 and the three months ended September 30, 2019, we recorded other-than-temporary impairment charges of $45.3 million and $81.5 million related to our investment in Laramie Energy, respectively. 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. Please read Note 3—Investment in Laramie Energy, LLC for further information. Income Taxes. For the nine months ended September 30, 2020 , we recorded an income tax benefit of $20.9 million primarily driven by an increase in our net operating loss carryforwards and the change in our indefinitely-lived goodwill due to the impairments. For the nine months ended September 30, 2019 , we recorded an income tax benefit of $69.0 million primarily driven by a $67.0 million benefit associated with a partial release of our valuation allowance in connection with the Washington Acquisition . Consolidating Condensed Financial Information On December 21, 2017 , Par Petroleum, LLC (the “Issuer”) issued its 7.75% Senior Secured Notes due 2025 in a private offering under Rule 144A and Regulation S of the Securities Act. On January 11, 2019, the Issuers (defined below) entered into a term loan and guaranty agreement with Goldman Sachs Bank USA, as administrative agent, and the lenders party thereto with respect to a $250.0 million term loan (the “ Term Loan B ”). On June 5, 2020, the Issuers issued their 12.875% Senior Secured Notes due 2026 in a private offering under Rule 144A and Regulation S of the Securities Act. The 7.75% Senior Secured Notes , the Term Loan B , and the 12.875% Senior Secured Notes were co-issued by Par Petroleum Finance Corp. (together with the Issuer, the “Issuers”), which has no independent assets or operations. The 7.75% Senior Secured Notes , Term Loan B , and 12.875% Senior Secured Notes are guaranteed on a senior unsecured basis only as to payment of principal and interest by Par Pacific Holdings, Inc. (the “Parent”) and are guaranteed on a senior secured basis by all of the subsidiaries of Par Petroleum, LLC (other than Par Petroleum Finance Corp.). The following supplemental condensed consolidating financial information reflects (i) the Parent’s separate accounts, (ii) Par Petroleum, LLC and its consolidated subsidiaries’ accounts (which are all guarantors of the 7.75% Senior Secured Notes , Term Loan B , and 12.875% Senior Secured Notes ), (iii) the accounts of subsidiaries of the Parent that are not guarantors of the 7.75% Senior Secured Notes , Term Loan B , or 12.875% Senior Secured Notes and consolidating adjustments and eliminations, and (iv) the Parent’s consolidated accounts for the dates and periods indicated. For purposes of the following condensed consolidating information, the Parent’s investment in its subsidiaries is accounted for under the equity method of accounting (dollar amounts in thousands). 45 As of September 30, 2020 Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries ASSETS Current assets Cash and cash equivalents $ 1,177 $ 125,497 $ 659 $ 127,333 Restricted cash 330 1,670 — 2,000 Trade accounts receivable 306 116,240 — 116,546 Inventories — 493,569 — 493,569 Prepaid and other current assets 1,419 7,940 319 9,678 Due from related parties 106,463 — (106,463 ) — Total current assets 109,695 744,916 (105,485 ) 749,126 Property, plant, and equipment Property, plant, and equipment 21,331 1,125,854 37,814 1,184,999 Less accumulated depreciation, depletion, and amortization (13,700 ) (218,659 ) (2,691 ) (235,050 ) Property, plant, and equipment, net 7,631 907,195 35,123 949,949 Long-term assets Operating lease right-of-use assets 3,858 377,601 (15,430 ) 366,029 Investment in subsidiaries 344,192 — (344,192 ) — Intangible assets, net — 19,556 — 19,556 Goodwill — 125,399 2,598 127,997 Other long-term assets 722 59,035 — 59,757 Total assets $ 466,098 $ 2,233,702 $ (427,386 ) $ 2,272,414 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Current maturities of long-term debt $ 46,646 $ 11,047 $ 1,568 $ 59,261 Obligations under inventory financing agreements — 470,905 — 470,905 Accounts payable 2,225 124,548 1,478 128,251 Deferred revenue — 5,994 — 5,994 Accrued taxes — 23,076 55 23,131 Operating lease liabilities 774 58,711 (4,192 ) 55,293 Other accrued liabilities 1,741 132,442 (1,315 ) 132,868 Due to related parties 29,599 85,421 (115,020 ) — Total current liabilities 80,985 912,144 (117,426 ) 875,703 Long-term liabilities Long-term debt, net of current maturities — 610,589 40,663 651,252 Finance lease liabilities 111 6,752 — 6,863 Operating lease liabilities 4,989 321,840 (11,238 ) 315,591 Other liabilities 73 78,712 (35,720 ) 43,065 Total liabilities 86,158 1,930,037 (123,721 ) 1,892,474 Commitments and contingencies Stockholders’ equity Preferred stock — — — — Common stock 539 — — 539 Additional paid-in capital 723,929 307,967 (307,967 ) 723,929 Accumulated earnings (deficit) (345,110 ) (5,714 ) 5,714 (345,110 ) Accumulated other comprehensive income 582 1,412 (1,412 ) 582 Total stockholders’ equity 379,940 303,665 (303,665 ) 379,940 Total liabilities and stockholders’ equity $ 466,098 $ 2,233,702 $ (427,386 ) $ 2,272,414 46 As of December 31, 2019 Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries ASSETS Current assets Cash and cash equivalents $ 6,309 $ 118,812 $ 894 $ 126,015 Restricted cash 743 1,670 — 2,413 Trade accounts receivable — 228,707 11 228,718 Inventories — 615,872 — 615,872 Prepaid and other current assets 12,325 46,470 361 59,156 Due from related parties 180,686 — (180,686 ) — Total current assets 200,063 1,011,531 (179,420 ) 1,032,174 Property, plant, and equipment Property, plant, and equipment 20,961 1,088,230 37,792 1,146,983 Less accumulated depreciation, depletion, and amortization (12,117 ) (170,607 ) (2,316 ) (185,040 ) Property, plant, and equipment, net 8,844 917,623 35,476 961,943 Long-term assets Operating lease right-of-use assets 4,276 434,909 (19,112 ) 420,073 Investment in Laramie Energy, LLC — — 46,905 46,905 Investment in subsidiaries 636,742 — (636,742 ) — Intangible assets, net — 21,549 — 21,549 Goodwill — 193,321 2,598 195,919 Other long-term assets 1,128 20,869 — 21,997 Total assets $ 851,053 $ 2,599,802 $ (750,295 ) $ 2,700,560 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Current maturities of long-term debt $ — $ 10,777 $ 1,520 $ 12,297 Obligations under inventory financing agreements — 656,162 — 656,162 Accounts payable 2,597 158,323 1,482 162,402 Deferred revenue — 7,905 — 7,905 Accrued taxes — 30,745 68 30,813 Operating lease liabilities 698 84,366 (5,065 ) 79,999 Other accrued liabilities 14,591 72,670 (2,517 ) 84,744 Due to related parties 125,778 101,936 (227,714 ) — Total current liabilities 143,664 1,122,884 (232,226 ) 1,034,322 Long-term liabilities Long-term debt, net of current maturities 44,783 513,145 41,706 599,634 Common stock warrants 8,206 — — 8,206 Finance lease liabilities 223 6,004 — 6,227 Operating lease liabilities 5,629 349,327 (14,047 ) 340,909 Other liabilities 306 120,001 (57,287 ) 63,020 Total liabilities 202,811 2,111,361 (261,854 ) 2,052,318 Commitments and contingencies Stockholders’ equity Preferred stock — — — — Common stock 533 — — 533 Additional paid-in capital 715,069 293,006 (293,006 ) 715,069 Accumulated earnings (deficit) (67,942 ) 194,023 (194,023 ) (67,942 ) Accumulated other comprehensive income 582 1,412 (1,412 ) 582 Total stockholders’ equity 648,242 488,441 (488,441 ) 648,242 Total liabilities and stockholders’ equity $ 851,053 $ 2,599,802 $ (750,295 ) $ 2,700,560 47 Three Months Ended September 30, 2020 Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries Revenues $ — $ 689,981 $ — $ 689,981 Operating expenses Cost of revenues (excluding depreciation) — 585,289 — 585,289 Operating expense (excluding depreciation) — 70,641 (1,183 ) 69,458 Depreciation, depletion, and amortization 753 21,941 127 22,821 General and administrative expense (excluding depreciation) 2,561 7,257 — 9,818 Acquisition and integration costs — (155 ) — (155 ) Total operating expenses 3,314 684,973 (1,056 ) 687,231 Operating income (loss) (3,314 ) 5,008 1,056 2,750 Other income (expense) Interest expense and financing costs, net (1,236 ) (16,059 ) (228 ) (17,523 ) Other income, net (8 ) 618 — 610 Equity earnings (losses) from subsidiaries (9,713 ) — 9,713 — Total other income (expense), net (10,957 ) (15,441 ) 9,485 (16,913 ) Income (loss) before income taxes (14,271 ) (10,433 ) 10,541 (14,163 ) Income tax benefit (expense) (1) — 2,148 (2,256 ) (108 ) Net income (loss) $ (14,271 ) $ (8,285 ) $ 8,285 $ (14,271 ) Adjusted EBITDA $ (2,569 ) $ (14,664 ) $ 1,183 $ (16,050 ) 48 Three Months Ended September 30, 2019 Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries Revenues $ — $ 1,401,637 $ 1 $ 1,401,638 Operating expenses Cost of revenues (excluding depreciation) — 1,265,755 — 1,265,755 Operating expense (excluding depreciation) — 84,420 (1,183 ) 83,237 Depreciation, depletion, and amortization 748 21,350 129 22,227 General and administrative expense (excluding depreciation) 5,046 6,276 69 11,391 Acquisition and integration costs 3 620 — 623 Total operating expenses 5,797 1,378,421 (985 ) 1,383,233 Operating income (loss) (5,797 ) 23,216 986 18,405 Other income (expense) Interest expense and financing costs, net (1,957 ) (15,503 ) (888 ) (18,348 ) Other income, net 39 43 1 83 Change in value of common stock warrants (826 ) — — (826 ) Equity earnings (losses) from subsidiaries (75,350 ) — 75,350 — Equity losses from Laramie Energy, LLC — — (85,633 ) (85,633 ) Total other income (expense), net (78,094 ) (15,460 ) (11,170 ) (104,724 ) Income (loss) before income taxes (83,891 ) 7,756 (10,184 ) (86,319 ) Income tax benefit (expense) (1) — (566 ) 2,994 2,428 Net income (loss) $ (83,891 ) $ 7,190 $ (7,190 ) $ (83,891 ) Adjusted EBITDA $ (5,007 ) $ 50,926 $ 1,116 $ 47,035 49 Nine Months Ended September 30, 2020 Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries Revenues $ — $ 2,409,363 $ 2 $ 2,409,365 Operating expenses Cost of revenues (excluding depreciation) — 2,236,778 — 2,236,778 Operating expense (excluding depreciation) — 213,425 (3,549 ) 209,876 Depreciation, depletion, and amortization 2,258 63,587 387 66,232 Impairment expense — 67,922 — 67,922 General and administrative expense (excluding depreciation) 8,190 23,633 — 31,823 Acquisition and integration costs — 600 — 600 Total operating expenses 10,448 2,605,945 (3,162 ) 2,613,231 Operating income (loss) (10,448 ) (196,582 ) 3,164 (203,866 ) Other income (expense) Interest expense and financing costs, net (3,709 ) (45,699 ) (3,203 ) (52,611 ) Other income, net 4 1,085 — 1,089 Change in value of common stock warrants 4,270 — — 4,270 Equity earnings (losses) from subsidiaries (267,285 ) — 267,285 — Equity losses from Laramie Energy, LLC — — (46,905 ) (46,905 ) Total other income (expense), net (266,720 ) (44,614 ) 217,177 (94,157 ) Income (loss) before income taxes (277,168 ) (241,196 ) 220,341 (298,023 ) Income tax benefit (expense) (1) — 41,457 (20,602 ) 20,855 Net income (loss) $ (277,168 ) $ (199,739 ) $ 199,739 $ (277,168 ) Adjusted EBITDA $ (8,029 ) $ (48,246 ) $ 3,551 $ (52,724 ) 50 Nine Months Ended September 30, 2019 Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries Revenues $ — $ 4,002,370 $ 12 $ 4,002,382 Operating expenses Cost of revenues (excluding depreciation) — 3,578,329 — 3,578,329 Operating expense (excluding depreciation) — 233,318 (1,577 ) 231,741 Depreciation, depletion, and amortization 2,224 62,700 179 65,103 Loss (gain) on sale of assets, net — (37,382 ) 37,382 — General and administrative expense (excluding depreciation) 14,940 19,367 128 34,435 Acquisition and integration costs 6 4,319 — 4,325 Total operating expenses 17,170 3,860,651 36,112 3,913,933 Operating income (loss) (17,170 ) 141,719 (36,100 ) 88,449 Other income (expense) Interest expense and financing costs, net (7,956 ) (46,493 ) (2,887 ) (57,336 ) Debt extinguishment and commitment costs (3,832 ) (5,354 ) — (9,186 ) Other income, net 2,274 73 — 2,347 Change in value of common stock warrants (3,065 ) — — (3,065 ) Equity earnings (losses) from subsidiaries 35,269 — (35,269 ) — Equity losses from Laramie Energy, LLC — — (84,841 ) (84,841 ) Total other income (expense), net 22,690 (51,774 ) (122,997 ) (152,081 ) Income (loss) before income taxes 5,520 89,945 (159,097 ) (63,632 ) Income tax benefit (expense) (1) (150 ) (18,917 ) 88,069 69,002 Net income (loss) $ 5,370 $ 71,028 $ (71,028 ) $ 5,370 Adjusted EBITDA $ (12,666 ) $ 177,200 $ 1,461 $ 165,995 ________________________________________ (1) The income tax benefit (expense) of the Parent Guarantor and Issuer and Subsidiaries is determined using the separate return method. The Non-Guarantor Subsidiaries and Eliminations column includes tax benefits recognized at the Par consolidated level that are primarily associated with changes to the consolidated valuation allowance and other deferred tax balances. 51 Non-GAAP Financial Measures Adjusted EBITDA for the supplemental consolidating condensed financial information, which is segregated at the “Parent Guarantor,” “Issuer and Subsidiaries,” and “Non-Guarantor Subsidiaries and Eliminations” levels, is calculated in the same manner as for the Par Pacific Holdings, Inc. Adjusted EBITDA calculations. See “Results of Operations — Non-GAAP Performance Measures — Adjusted Net Income (Loss) and Adjusted EBITDA” above. The following tables present a reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measure, Net income (loss) , on a historical basis for the periods indicated (in thousands): Three Months Ended September 30, 2020 Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries Net income (loss) $ (14,271 ) $ (8,285 ) $ 8,285 $ (14,271 ) Inventory valuation adjustment — (43,980 ) — (43,980 ) LIFO liquidation adjustment — 6,211 — 6,211 RINs loss (gain) in excess of net obligation — 645 — 645 Unrealized loss (gain) on derivatives — (4,952 ) — (4,952 ) Acquisition and integration costs — (155 ) — (155 ) Depreciation, depletion, and amortization 753 21,941 127 22,821 Interest expense and financing costs, net 1,236 16,059 228 17,523 Equity losses (income) from subsidiaries 9,713 — (9,713 ) — Income tax expense (benefit) — (2,148 ) 2,256 108 Adjusted EBITDA (3) $ (2,569 ) $ (14,664 ) $ 1,183 $ (16,050 ) Three Months Ended September 30, 2019 Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries Net income (loss) $ (83,891 ) $ 7,190 $ (7,190 ) $ (83,891 ) Inventory valuation adjustment — 22,091 — 22,091 RINs loss (gain) in excess of net obligation — (1,240 ) — (1,240 ) Unrealized loss (gain) on derivatives — (15,154 ) — (15,154 ) Acquisition and integration costs 3 620 — 623 Changes in valuation allowance and other deferred tax items (1) — — (2,751 ) (2,751 ) Change in value of common stock warrants 826 — — 826 Impairment of Investment in Laramie Energy, LLC (2) — — 81,515 81,515 Par’s share of Laramie Energy’s unrealized loss on derivatives (2) — — 1,961 1,961 Depreciation, depletion, and amortization 748 21,350 129 22,227 Interest expense and financing costs, net 1,957 15,503 888 18,348 Equity losses from Laramie Energy, LLC, excluding Par’s share of unrealized loss on derivatives and impairment losses — — 2,157 2,157 Equity losses (income) from subsidiaries 75,350 — (75,350 ) — Income tax expense (benefit) — 566 (243 ) 323 Adjusted EBITDA (3) $ (5,007 ) $ 50,926 $ 1,116 $ 47,035 52 Nine Months Ended September 30, 2020 Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries Net income (loss) $ (277,168 ) $ (199,739 ) $ 199,739 $ (277,168 ) Inventory valuation adjustment — (4,635 ) — (4,635 ) LIFO liquidation adjustment — 6,211 — 6,211 RINs loss (gain) in excess of net obligation — 17,985 — 17,985 Unrealized loss (gain) on derivatives — (4,507 ) — (4,507 ) Acquisition and integration costs — 600 — 600 Changes in valuation allowance and other deferred tax items (1) — — (21,087 ) (21,087 ) Change in value of common stock warrants (4,270 ) — — (4,270 ) Severance costs 157 88 — 245 Impairment expense — 67,922 — 67,922 Impairment of Investment in Laramie Energy, LLC (2) — — 45,294 45,294 Par’s share of Laramie Energy’s unrealized gain on derivatives (2) — — (1,110 ) (1,110 ) Depreciation, depletion, and amortization 2,258 63,587 387 66,232 Interest expense and financing costs, net 3,709 45,699 3,203 52,611 Equity losses from Laramie Energy, LLC, excluding Par’s share of unrealized gain on derivatives and impairment losses — — 2,721 2,721 Equity losses (income) from subsidiaries 267,285 — (267,285 ) — Income tax expense (benefit) — (41,457 ) 41,689 232 Adjusted EBITDA (3) $ (8,029 ) $ (48,246 ) $ 3,551 $ (52,724 ) Nine Months Ended September 30, 2019 Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries Net income (loss) $ 5,370 $ 71,028 $ (71,028 ) $ 5,370 Inventory valuation adjustment — 3,287 — 3,287 RINs loss (gain) in excess of net obligation — (3,039 ) — (3,039 ) Unrealized loss on derivatives — 5,523 — 5,523 Acquisition and integration costs 6 4,319 — 4,325 Debt extinguishment and commitment costs 3,832 5,354 — 9,186 Changes in valuation allowance and other deferred tax items (1) — — (70,420 ) (70,420 ) Change in value of common stock warrants 3,065 — — 3,065 Loss (gain) on sale of assets, net — (37,382 ) 37,382 — Impairment of Investment in Laramie Energy, LLC (2) — — 81,515 81,515 Par’s share of Laramie Energy’s unrealized gain on derivatives (2) — — (3,129 ) (3,129 ) Depreciation, depletion, and amortization 2,224 62,700 179 65,103 Interest expense and financing costs, net 7,956 46,493 2,887 57,336 Equity losses from Laramie Energy, LLC, excluding Par’s share of unrealized gain on derivatives and impairment losses — — 6,455 6,455 Equity losses (income) from subsidiaries (35,269 ) — 35,269 — Income tax expense (benefit) 150 18,917 (17,649 ) 1,418 Adjusted EBITDA (3) $ (12,666 ) $ 177,200 $ 1,461 $ 165,995 ________________________________________ 53 (1) Included in Income tax benefit (expense) on our condensed consolidated statements of operations. (2) Included in Equity earnings (losses) from Laramie Energy, LLC on our condensed consolidated statements of operations. (3) For the three and nine months ended September 30, 2019 , there were no severance costs or LIFO liquidation adjustments. For the three months ended September 30, 2020, there was no impairment expense, earnings (losses) attributed to Laramie, change in valuation allowance and other deferred tax items, or common stock warrants outstanding. Liquidity and Capital Resources Our liquidity and capital requirements are primarily a function of our debt maturities and debt service requirements and contractual obligations, capital expenditures, turnaround outlays, and working capital needs. Examples of working capital needs include purchases and sales of commodities and associated margin and collateral requirements, facility maintenance costs, and other costs such as payroll. Our primary sources of liquidity are cash flows from operations, cash on hand, amounts available under our credit agreements, and access to capital markets. Our liquidity position as of September 30, 2020 was $190.6 million and consisted of $188.2 million at Par Petroleum, LLC and subsidiaries, $2.3 million at Par Pacific Holdings, and an immaterial amount at all our other subsidiaries. As of September 30, 2020 , we had access to the J. Aron Deferred Payment Arrangement, the ABL Credit Facility , the MLC receivable advances , and cash on hand of $127.3 million . In addition, we have the Supply and Offtake Agreements with J. Aron and the Washington Refinery Intermediation Agreement , which are used to finance the majority of the inventory at our Hawaii and Washington refineries, respectively. Generally, the primary uses of our capital resources have been in the operations of our refining and retail segments, payments related to acquisitions, and to repay or refinance indebtedness. We believe our cash flows from operations and available capital resources will be sufficient to meet our current capital and turnaround expenditures, working capital, and debt service requirements for the next 12 months. We may seek to raise additional debt or equity capital to fund any other significant changes to our business or to refinance existing debt. We cannot offer any assurances that such capital will be available in sufficient amounts or at an acceptable cost. We may from time to time seek to retire or repurchase our 5.00% Convertible Senior Notes , our 7.75% Senior Secured Notes , our 12.875% Senior Secured Notes , or our common stock through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions, or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors. The amounts involved may be material. Cash Flows The following table summarizes cash activities for the nine months ended September 30, 2020 and 2019 (in thousands): Nine Months Ended September 30, 2020 2019 Net cash provided by operating activities $ 25,953 $ 98,632 Net cash used in investing activities (42,428 ) (334,287 ) Net cash provided by financing activities 17,380 272,971 Net cash provided by operating activities was approximately $26.0 million for the nine months ended September 30, 2020 , which resulted from a net loss of approximately $277.2 million , offset by net cash provided by changes in operating assets and liabilities of approximately $117.5 million and non-cash charges to operations of approximately $185.6 million . The change in our operating assets and liabilities for the nine months ended September 30, 2020 was primarily due to a decrease in our trade receivables of $112.2 million and a decrease in inventories of $98.8 million , partially offset by a net decrease in our Supply and Offtake Agreements and Washington Refinery Intermediation Agreement obligations of $124.4 million . Net cash provided by changes in operating assets and liabilities also includes an increase of $40.6 million in deferred turnaround costs associated with the Hawaii and Wyoming planned turnarounds. These decreases in accounts receivable, inventory, and Supply and Offtake Agreements were primarily driven by the decline in crude oil prices in 2020 and overall decline in sales and inventory volumes resulting from COVID-19 demand destruction. Net cash provided by operating activities was approximately $98.6 million for the nine months ended September 30, 2019 , which resulted from net income of approximately $5.4 million and non-cash charges to operations of approximately $113.2 million primarily related to a $81.5 million non-cash impairment of our Investment in Laramie Energy, offset by net cash used for changes in operating assets and liabilities of approximately $19.9 million . 54 For the nine months ended September 30, 2020 , net cash used in investing activities was approximately $42.4 million and primarily related to additions to property, plant, and equipment totaling approximately $42.5 million . Net cash used in investing activities was approximately $334.3 million for the nine months ended September 30, 2019 and primarily related to $274.3 million net cash consideration paid for the Washington Acquisition and additions to property and equipment totaling approximately $64.1 million . Net cash provided by financing activities for the nine months ended September 30, 2020 was approximately $17.4 million , which consisted primarily of net debt and insurance premium borrowings of approximately $85.5 million , offset by net repayments associated with the J. Aron deferred payment and MLC receivable advances of approximately $60.8 million and payments of $6.3 million in deferred loan costs primarily related to the issuance of the 12.875% Senior Secured Notes . Net cash provided by financing activities for the nine months ended September 30, 2019 was approximately $273.0 million , which consisted primarily of net debt borrowings of approximately $263.4 million and net borrowings associated with the J. Aron deferred payment and MLC receivable advances of approximately $27.8 million , offset by the payments of $13.5 million in deferred loan costs and $7.1 million in commitment and extinguishment costs related to the funding for the Washington Acquisition and the financing costs related to the repurchase and cancellation of a portion of our 5.00% Convertible Senior Notes. Capital Expenditures and Turnaround Costs Our deferred turnaround costs and capital expenditures, excluding acquisitions, for the nine months ended September 30, 2020 totaled approximately $83.0 million and were primarily related to equipment purchases and engineering work for the 2020 turnarounds at our Par East Hawaii and Wyoming refineries, the second phase of a Washington renewables project, tank compliance construction and repairs within our Wyoming logistics network, and scheduled maintenance. Our capital expenditure and deferred turnaround cost budget for 2020 ranges from $95 million to $115 million and primarily relates to the second phase of a Washington renewables project, equipment purchases and engineering work related to the execution of the 2020 turnarounds at our Par East Hawaii and Wyoming refineries, tank compliance construction and repairs within our Wyoming logistics network, and scheduled maintenance and other capital projects. We also continue to seek strategic investments in business opportunities, but the amount and timing of those investments are not predictable. 55 Commitments and Contingencies Supply and Offtake Agreements. On June 1, 2015, we entered into the Supply and Offtake Agreements with J. Aron to support the operations of our Par East Hawaii refinery. On May 8, 2017, we and J. Aron amended the Supply and Offtake Agreements and extended the term through May 31, 2021 with a one -year extension option upon mutual agreement of the parties. On June 27, 2018, we and J. Aron amended the Supply and Offtake Agreements to increase the amount that we may defer under the deferred payment arrangement. On December 5, 2018 , we and J. Aron amended the Supply and Offtake Agreements to account for additional processing capacity expected to be provided by the Par West Hawaii refinery. We are evaluating options to extend or replace the Supply and Offtake Agreements. Please read Note 9—Inventory Financing Agreements for more information. Washington Refinery Intermediation Agreement . In connection with the consummation of the Washington Acquisition on January 11, 2019 , we assumed the Washington Refinery Intermediation Agreement with MLC to support the operations of our Washington refinery. 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. Please read Note 9—Inventory Financing Agreements for more information. From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of our business. Please read Note 14—Commitments and Contingencies to our condensed consolidated financial statements for more information. Critical Accounting Policies and Estimates There have been no material changes to critical accounting policies disclosed in our Annual Report on Form 10-K. Forward-Looking Statements Certain statements in this Quarterly Report on Form 10-Q may constitute “forward-looking” statements as defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Private Securities Litigation Reform Act of 1995 (“PSLRA”), or in releases made by the SEC, all as may be amended from time to time. Such forward-looking statements involve known and unknown risks, uncertainties, and other important factors including, without limitation, our expectations regarding the impact of COVID-19 on our business, our customers, and the markets where we operate; our beliefs with regard to available capital resources, our beliefs regarding the likelihood or impact of any potential fines or penalties and of the fair value of certain assets, and our expectations with respect to laws and regulations, including environmental regulations and related compliance costs and any fines or penalties related thereto; our expectations regarding the sufficiency of our cash flows and liquidity; our expectations regarding anticipated capital expenditures, including the timing and cost of compliance with consent decrees and other enforcement actions; our expectations regarding the impact of the adoption of certain accounting standards; our estimates regarding the fair value of certain indebtedness; estimated costs to settle claims from the Delta bankruptcy; the estimated value of, and our ability to settle, legal claims remaining to be settled against third parties; our expectations regarding the synergies or other benefits of our acquisitions; our expectations regarding certain tax liabilities and debt obligations; our expectations and estimates regarding our Supply and Offtake Agreements and the Washington Refinery Intermediation Agreement ; management’s assumptions about future events; our ability to raise additional debt or equity capital; our ability to make strategic investments in business opportunities; and the estimates, assumptions, and projections regarding future financial condition, results of operations, liquidity, and cash flows. These and other forward-looking statements could cause the actual results, performance, or achievements of Par and its subsidiaries to differ materially from any future results, performance, or achievements expressed or implied by such forward-looking statements. Statements that are not historical fact are forward-looking statements. Forward-looking statements can be identified by, among other things, the use of forward-looking language, such as the words “plan,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “may,” “will,” “would,” “could,” “should,” “seeks,” or “scheduled to,” or other similar words, or the negative of these terms or other variations of these terms or comparable language, or by discussion of strategy or intentions. These cautionary statements are being made pursuant to the Securities Act, the Exchange Act, and the PSLRA with the intention of obtaining the benefits of the “safe harbor” provisions of such laws. The forward-looking statements contained in this Quarterly Report on Form 10-Q are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control, including those set out in our most recent Annual Report on Form 10-K and this Quarterly Report on Form 10-Q under “Risk Factors.” In addition, management’s assumptions about future events may prove to be inaccurate. All readers are cautioned that the forward-looking statements contained in this Quarterly Report on Form 10-Q are not guarantees of future performance; and we cannot assure any reader that such statements will be realized or that the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to factors described above and under Critical Accounting Policies and Risk Factors included in our most recent Annual Report on Form 10-K and in 56 this Quarterly Report on Form 10-Q. All forward-looking statements speak only as of the date they are made. Additionally, significant uncertainties remain with respect to COVID-19 and its economic effects. Due to the unpredictable and unprecedented nature of the COVID-19 pandemic, we cannot identify all potential risks to, and impacts on, our business, including the ultimate adverse economic impact to the Company’s business, results of operations, financial condition, and liquidity. However, the adverse impact of COVID-19 on the Company has been and will likely continue to be material. There can be no guarantee that the operational and financial measures the Company has taken, and may take in the future, will be fully effective. We do not intend to update or revise any forward-looking statements as a result of new information, future events, or otherwise. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.