What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-03-08 compared with 2020-03-02 · 890 added, 915 removed, 1694 unchanged (52% of the section changed)

18 unchanged sentences

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Par Pacific Holdings, Inc.

Houston, Texas

To the Board of Directors and Stockholders of Par Pacific Holdings, Inc.

Opinion on Internal Control over Financial Reporting

2 unchanged sentences

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2019 of the Company and our report dated March 2, 2020 expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s adoption of a new accounting standard.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2020, of the Company and our report dated March 8, 2021, expressed an unqualified opinion on those financial statements.

Basis for Opinion

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EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this report:

(a) The following documents are filed as part of this report:

(1) Consolidated Financial Statements (Included under Item 8).

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Schedule I – Condensed Financial Information of Registrant

Index to Exhibits

In accordance with Regulation S-X Rule 3-09, we anticipate that the audited financial statements of Laramie Energy will be filed on or before March 30, 2020 as an amendment to this Form 10-K Filing.

2.1 Third Amended Joint Chapter 11 Plan of Reorganization of Delta Petroleum Corporation and Its Debtor Affiliates dated August 16, 2012.

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Incorporated by reference to Exhibit 4.3 to the Company’s registration statement on Form S-3 filed on December 21, 2018.

Warrant Issuance Agreement dated as of August 31, 2012, by and among the Company and WB Delta, Ltd., Waterstone Offshore ER Fund, Ltd., Prime Capital Master SPC, Waterstone Market Neutral MAC51, Ltd., Waterstone Market Neutral Master Fund, Ltd., Waterstone MF Fund, Ltd., Nomura Waterstone Market Neutral Fund, ZCOF Par Petroleum Holdings, L.L.C., and Highbridge International, LLC.

Incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on September 7, 2012.

Form of Common Stock Purchase Warrant dated as of June 4, 2012.

Incorporated by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed on September 7, 2012.

4.4 Par Pacific Holdings, Inc.

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Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on January 14, 2019.

4.21 Third Supplemental Indenture, dated August 15, 2019, among Par Hawaii, LLC (successor by conversion to Par Hawaii, Inc.), Par Petroleum, LLC, Par Petroleum Finance Corp., Par Pacific Holdings, Inc., the other guarantors party thereto, and Wilmington Trust, National Association.

Incorporated by reference to Exhibit 4.2 3 to the Company’s Quarterly Report on Form 10-Q filed on August 10, 2020.

4.22 Registration Rights Agreement dated as of December 19, 2018, by and between the Company and IES Downstream, LLC.

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Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on January 14, 2019.

4.24 Indenture, dated as of June 5, 2020, among Par Petroleum, LLC, Par Petroleum Finance Corp., the Guarantors (as defined therein) and Wilmington Trust, National Association, as Trustee and Collateral Trustee.

Incorporated by reference to Exhibit 4.1 to the Company’s current report on Form 8-K filed on June 8, 2020.

4.25 Description of Registrant’s Securities.*

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Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on September 7, 2012.

Pledge Agreement dated August 31, 2012, by Par Piceance Energy Equity LLC in favor of Jefferies Finance LLC.

Incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on September 7, 2012.

Intercreditor Agreement dated August 31, 2012, by and among JP Morgan Chase Bank, N.A., as administrative agent for the First Priority Secured Parties (as defined therein), Jefferies Finance LLC, as administrative agent for the Second Priority Secured Parties (as defined therein), the Company and Par Piceance Energy Equity LLC.

Incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on September 7, 2012.

Pledge and Security Agreement, dated August 31, 2012, by the Company and certain of its subsidiaries in favor of Jefferies Finance LLC.

Incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed on September 7, 2012.

10.6 Form of Indemnification Agreement between the Company and its Directors and Executive Officers.

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10.14 Form of Award of Restricted Stock (Discretionary Long Term Incentive Plan).

Incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K filed on March 2, 2020.

10.15 Form of Award of Restricted Stock Units (Discretionary Long Term Incentive Plan).

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Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on August 8, 2019.

Storage Facilities Agreement dated as of June 1, 2015, between Hawaii Independent Energy, LLC and J.

Aron & Company.

Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed June 2, 2015.

Marketing and Sales Agreement dated as of June 1, 2015, between Hawaii Independent Energy, LLC and J.

Aron & Company.

Incorporated as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed June 2, 2015.

10.22 Amendment to Amended and Restated Supply and Offtake Agreement dated as of March 31, 2020, by and among Par Hawaii Refining, LLC f/k/a Hawaii Independent Energy, LLC, Par Petroleum, LLC, and J.

Aron & Company LLC.

Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on May 11 , 2020.

10.23 Amended and Restated Pledge and Security Agreement dated as of December 21, 2017, between Par Hawaii Refining, LLC and J.

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Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed October 14, 2015.****

Unit Purchase Agreement dated February 22, 2016, by and among Laramie Energy, LLC, Par Piceance Energy Equity LLC, and the other parties thereto.

Incorporated by reference to Exhibit 10.74 to the Company’s Annual Report on Form 10-K filed on March 3, 2016.**

Equity Commitment Letter dated December 17, 2015, by and between Par Pacific Holdings, Inc.

and Piceance Energy, LLC.

Incorporated by reference to Exhibit 10.75 to the Company’s Annual Report on Form 10-K filed on March 3, 2016.**

10.28 Par Pacific Holdings, Inc.

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Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on January 14, 2019.

10.36 Fifth Amendment to Loan and Security Agreement, dated as of June 5, 2020, among Par Petroleum, LLC, Par Hawaii, LLC, Hermes Consolidated, LLC, Wyoming Pipeline Company LLC, the guarantors party thereto, the financial institutions party thereto, as lenders, and Bank of America, N.A., as administrative agent and collateral agent for the lenders.

Incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed on June 8, 2020.

10.37 Conformed Copy of First Lien ISDA Master Agreement dated as of January 11, 2019, between Merrill Lynch Commodities, Inc.

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Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 4, 2019.

Amendment to Amended and Restated Pledge and Security Agreement dated January 11, 2019, among Par Hawaii Refining, LLC and J.

10.39 Thirteenth Amendment to First Lien ISDA 2002 Master Agreement entered into as of February 11, 2021 by and between U.S.

Oil & Refining Co.

and Merrill Lynch Commodities, Inc .

Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 16, 2021.

10.40 Omnibus Amendment to Amended and Restated Pledge and Security Agreement and Amended and Restated Supply and Offtake Agreement, dated as of June 5, 2020, among Par Hawaii Refining, LLC, Par Petroleum, LLC and J.

Aron & Company LLC.

Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on January 14, 2019.

Loan Agreement, dated January 9, 2019, between Par Pacific Holdings, Inc.

and Bank of Hawaii.

Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on January 14, 2019.

Note made by Par Pacific Holdings, Inc.

to Bank of Hawaii, dated as of January 9, 2019.

Incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on January 14, 2019.

Note made by Par Pacific Hawaii Property Company, LLC to Bank of Hawaii, dated as of March 29, 2019.

Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 3, 2019.

Incorporated by reference to Exhibit 10.2 to the Company’s current report on Form 8-K filed on June 8, 2020.

10.41 Increase Agreement dated July 24, 2018 among Par Petroleum, LLC, Par Hawaii, Inc., Mid Pac Petroleum, LLC, HIE Retail, LLC, Hermes Consolidated, LLC, Wyoming Pipeline Company, LLC, and certain lenders.

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Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on November 7, 2018.

Unit Purchase Agreement by and among Laramie Energy, LLC, EnCap Energy Capital Fund VI, L.P., and EnCap Energy VI-B Acquisitions, L.P., dated as of October 18, 2018.

Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on November 7, 2018.

10.43 Second Amendment to Loan and Security Agreement dated as of October 16, 2018 by and among Par Petroleum, LLC, Par Hawaii, Inc., Mid Pac Petroleum, LLC, HIE Retail, LLC, Hermes Consolidated, LLC, Wyoming Pipeline Company, LLC, and the other members party thereto, the financial institutions party thereto, and Bank of America, N.A., as administrative agent.

Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on November 7, 2018.

Term Loan Agreement dated as of March 29, 2019, between Par Pacific Hawaii Property Company, LLC and Bank of Hawaii.

Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 3, 2019.

Guaranty Agreement dated as of March 29, 2019 executed by Par Pacific Holdings, Inc.

in favor of Bank of Hawaii.

Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on April 3, 2019.

10.44 Form of Exchange Agreement.

Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 16, 2019.

10.45 Pledge and Security Agreement dated as of December 21, 2017 among Par Petroleum, LLC and Wilmington Trust, National Association, as collateral trustee.

14.1 Par Pacific Holdings, Inc.

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23.1 Consent of Deloitte & Touche LLP*

Consent of Netherland, Sewell & Associates, Inc.*

31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

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Section 1350.***

Report of Netherland, Sewell & Associates, Inc.

regarding the registrants Proved Reserves as of December 31, 2019.*

XBRL Instance Document.***

XBRL Taxonomy Extension Schema Documents.***

XBRL Taxonomy Extension Calculation Linkbase Document.***

XBRL Taxonomy Extension Label Linkbase Document.***

XBRL Taxonomy Extension Presentation Linkbase Document.***

XBRL Taxonomy Extension Definition Linkbase Document.***

101.INS Inline XBRL Instance Document the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.*

101.SCH Inline XBRL Taxonomy Extension Schema Documents.*

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.*

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.*

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.*

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.*

104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).*

* Filed herewith.

Schedules and similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K.

The Company will furnish supplementally a copy of any omitted schedule or similar attachment to the Securities and Exchange Commission upon request.

These interactive data files are furnished and deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended and otherwise are not subject to liability under those sections.

*** Furnished herewith.

**** Management contract or compensatory plan or arrangement.

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For the Years Ended December 31, 2020, 2019, and 2018

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Cash Flows

Consolidated Statements of Changes in Stockholders’ Equity

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm F- 2

Consolidated Balance Sheets F- 5

Consolidated Statements of Operations F- 6

Consolidated Statements of Comprehensive Income (Loss) F- 7

Consolidated Statements of Cash Flows F- 8

Consolidated Statements of Changes in Stockholders’ Equity F- 9

Notes to Consolidated Financial Statements F- 10

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Par Pacific Holdings, Inc.

Houston, Texas

To the Board of Directors and Stockholders of Par Pacific Holdings, Inc.

Opinion on the Financial Statements

3 unchanged sentences

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 8, 2021 expressed an unqualified opinion on the Company’s internal control over financial reporting.

Emphasis of a Matter

As discussed in Note 2 to the financial statements, the Company has changed its method of accounting for right-of-use assets and lease liabilities in 2019 due to the adoption of Accounting Standards Update No.

2016-02, Leases (Topic 842) .

Basis for Opinion

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill — Certain Reporting Units — Refer to Notes 2, 10, and 15 to the financial statements.

Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value.

The Company determines the fair value of its reporting units using the discounted cash flow model and the market approach.

The determination of the fair value using the discounted cash flow model requires management to make significant estimates and assumptions related to discount rates and forecasts of future gross margin and operating expenses.

The determination of the fair value using the market approach requires management to make significant assumptions related to valuation multiples.

Changes in these assumptions could have a significant impact on either the fair value, or the amount of any goodwill impairment charge, or both.

The goodwill balance was $128.0 million as of December 31, 2020, net of a $67.9 million impairment loss recorded during the year ended December 31, 2020.

We identified goodwill associated with certain reporting units as a critical audit matter because of the significant judgments made by management to estimate the fair value of the reporting units and, consequently, the difference between their fair value

and carrying value.

The audit procedures performed to evaluate the reasonableness of management’s estimates and assumptions related to the selection of discount rate, valuation multiples, and forecasts of future gross margin and operating expenses required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the discount rate, valuation multiples, and forecasts of future gross margin and operating expenses used by management to estimate the fair value of certain reporting units included the following, among others:

• We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the underlying assumptions, such as management’s selection of the discount rate, selection of valuation multiples, and forecasts of future gross margin and operating expenses.

• We evaluated management’s ability to accurately forecast by comparing actual results to management’s historical forecasts.

• We evaluated the reasonableness of management’s gross margin and operating expenses forecasts by comparing the forecasts to:

• Historical financial results.

• Internal communications to management and the Board of Directors.

• Forecasted information included in Company press releases as well as in analyst and industry reports for the Company and certain of its peer companies.

• We evaluated the impact of changes in financial results compared to management’s forecast between the March 31, 2020 interim measurement date and the October 1, 2020 annual measurement date.

• We evaluated the impact of changes in management’s forecasts from the measurement dates to December 31, 2020.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology, (2) discount rate, and (3) valuation multiples by:

• Testing the source information underlying the determination of the discount rate and valuation multiples and the mathematical accuracy of the calculations.

• Developing a range of independent estimates and comparing those to the discount rate and valuation multiples selected by management.

Impairment – Investment in Laramie Energy, LLC — Refer to Note 3 to the financial statements.

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The Company’s investment in Laramie Energy, LLC is evaluated for impairment when events or changes in circumstances indicate that the carrying value of the Company’s investment may not be recoverable.

The Company’s evaluation of the

recoverability of its investment involves comparison of the estimated fair value based on discounted future cash flows expected to be generated by Laramie Energy, LLC to the carrying amount of its investment.

During 2019, the Company conducted an impairment evaluation of its investment in Laramie Energy, LLC because of the significant decline in natural gas prices over the year.

The Company’s evaluation of the recoverability of its investment involves comparison of the estimated fair value based on discounted future cash flows expected to be generated by Laramie Energy, LLC to the carrying amount of its investment.

At March 31, 2020, the Company conducted an impairment evaluation of its investment in Laramie Energy, LLC 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.

As the carrying value of the Company’s investment was determined not to be recoverable, the Company adjusted its investment to fair value based on the discounted future cash flows and recognized an impairment for the carrying amount in excess of fair value.

The carrying amount of the Company’s investment in Laramie Energy, LLC as of December 31, 2019 was $46.9 million, net of an $81.5 million impairment loss recorded during the year ended December 31, 2019 .

Due to a $45.3 million other-than-temporary impairment charge recorded and additional losses incurred by Laramie Energy, LLC during the year ended December 31, 2020, the Company no longer had any carrying amount recorded related to its investment in Laramie Energy, LLC as of December 31, 2020.

The development of the Company’s oil and natural gas reserve quantities and the related discounted future cash flows requires management to make significant estimates and assumptions related to future oil and natural gas prices and the discount rate applied to future cash flows.

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Changes in these assumptions or engineering data could have a significant impact on the amount of impairment.

Given the significant judgments made by management, performing audit procedures to evaluate the discounted future cash flows, including management’s estimates and assumptions related to future oil and gas prices and the discount rate applied to future cash flows, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

The audit procedures performed to evaluate the discounted future cash flows, including management’s estimates and assumptions related to future oil and gas prices and the discount rate applied to future cash flows, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

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• Understanding the methodology used by management for determination of the applicable discount rate and by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities.

Evaluating the experience, qualifications and objectivity of Laramie Energy LLC’s expert, an independent reservoir engineering firm, including performing analytical procedures on the reserve quantities.

Acquisitions – U.S.

Oil & Refining Co.

— Refer to Note 4 to the financial statements .

Critical Audit Matter Description

The Company completed the acquisition of U.S.

Oil & Refining Co.

and certain affiliated entities (collectively “U.S.

Oil”) for a total purchase price of $326.5 million on January 11, 2019.

The purchase price was allocated to the assets acquired and liabilities assumed based on their respective estimated fair values.

The largest asset class acquired was plant, property and equipment, for which fair value was determined based on the cost approach for buildings, refining process units, tanks, vessels, terminals, pipelines and equipment, and the market approach for land.

We identified the acquisition of U.S.

Oil as a critical audit matter because of the estimates management made to determine the fair value of certain assets acquired and liabilities assumed.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our valuation specialists when performing audit procedures to determine the fair value of acquired buildings, refining process units, tanks, vessels, terminals, pipelines and equipment under the cost approach, including estimating cost to acquire or construct comparable assets adjusted for the remaining useful lives, and land under the market approach.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the fair value of assets acquired and liabilities assumed for U.S.

Oil included the following, among others:

We tested the effectiveness of controls over the purchase price allocation, including management’s controls over the assumptions used in the cost approach for buildings, refining process units, tanks, vessels, terminals, pipelines and

equipment including estimating the cost to acquire or construct comparable assets adjusted for remaining useful lives;

and the market approach for land and reviewing the work of third-party specialists.

With the assistance of our fair value specialists:

We evaluated the reasonableness of selected valuation methodologies;

We tested the cost to acquire or construct comparable assets and the remaining useful lives used for the cost approach for buildings, refining process units, tanks, vessels, terminals, pipelines and equipment, including comparing such estimates to source information;

We tested the underlying source information used for the market approach for land.

We considered any events or transactions occurring after the acquisition date that may indicate a different valuation for the assets acquired and liabilities assumed.

• Evaluating the experience, qualifications and objectivity of Laramie Energy LLC’s expert, an independent reservoir engineering firm.

/s/ DELOITTE & TOUCHE LLP

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(in thousands, except share data)

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Current assets

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Total cash, cash equivalents, and restricted cash 70,309 128,428

Trade accounts receivable

Trade accounts receivable, net of allowances of $ 0.6 million and $ 1.2 million at December 31, 2020 and December 31, 2019, respectively

111,657 228,718

Inventories 429,855 615,872

Prepaid and other current assets 24,648 59,156

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Long-term assets

Operating lease assets

Operating lease right-of-use (“ROU”) assets 357,166 420,073

Investment in Laramie Energy, LLC — 46,905

Intangible assets, net 18,892 21,549

Goodwill 127,997 195,919

Other long-term assets 60,572 21,997

Total assets $ 2,133,861 $ 2,700,560

LIABILITIES AND STOCKHOLDERS’ EQUITY

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Accumulated deficit ( 477,028 ) ( 67,942 )

Accumulated other comprehensive income

Accumulated other comprehensive income (loss) ( 3,742 ) 582

Total stockholders’ equity 246,274 648,242

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Year Ended December 31,

2020 2019 2018

Revenues $ 3,124,870 $ 5,401,516 $ 3,410,728

Operating expenses

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Depreciation, depletion, and amortization 90,036 86,121 52,642

Impairment expense 85,806 — —

General and administrative expense (excluding depreciation) 41,288 46,223 47,426

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Total operating expenses 3,442,868 5,253,536 3,328,787

Operating income

Operating income (loss) ( 317,998 ) 147,980 81,941

Other income (expense)

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Debt extinguishment and commitment costs — ( 11,587 ) ( 4,224 )

Other income (expense), net

Other income, net 1,049 2,516 1,046

Change in value of common stock warrants 4,270 ( 3,199 ) 1,801

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Income tax benefit (expense) 20,720 69,689 ( 333 )

Income per share

Net income (loss) $ ( 409,086 ) $ 40,809 $ 39,427

Income (loss) per share

Basic $ ( 7.68 ) $ 0.80 $ 0.85

Diluted $ ( 7.68 ) $ 0.80 $ 0.85

Weighted-average number of shares outstanding

Basic 53,295 50,352 45,726

Diluted 53,295 50,470 45,755

See accompanying notes to consolidated financial statements.

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

Year Ended December 31,

2020 2019 2018

Net income (loss) $ ( 409,086 ) $ 40,809 $ 39,427

Other comprehensive income (loss):

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Total other comprehensive income (loss), net of tax ( 4,324 ) ( 2,091 ) 529

Comprehensive income

Comprehensive income (loss) $ ( 413,410 ) $ 38,718 $ 39,956

See accompanying notes to consolidated financial statements.

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Year Ended December 31,

2020 2019 2018

Cash flows from operating activities:

Adjustments to reconcile net income to cash provided by operating activities:

Net income (loss) $ ( 409,086 ) $ 40,809 $ 39,427

Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:

Depreciation, depletion, and amortization 90,036 86,121 52,642

Impairment expense 85,806 — —

Debt extinguishment and commitment costs — 11,587 4,224

Non-cash interest expense 6,902 9,118 7,127

Non-cash lower of cost and net realizable value adjustment 10,595 ( 3,752 ) 3,752

Change in value of common stock warrants ( 4,270 ) 3,199 ( 1,801 )

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Prepaid and other assets 29,465 ( 24,121 ) ( 5,521 )

Inventories 171,880 ( 191,688 ) 28,088

Deferred turnaround expenditures ( 49,770 ) ( 9,800 ) —

Obligations under inventory financing agreements ( 190,831 ) 121,985 ( 17,138 )

Accounts payable, other accrued liabilities, and operating lease assets and liabilities

Net cash provided by operating activities

Accounts payable, other accrued liabilities, and operating lease ROU assets and liabilities 67,193 68,969 19,885

Net cash provided by (used in) operating activities ( 37,214 ) 105,630 90,620

Cash flows from investing activities:

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Other financing activities, net ( 428 ) 582 ( 860 )

Net cash provided by (used in) financing activities

Net cash provided by financing activities 42,559 300,208 41,943

Net increase (decrease) in cash, cash equivalents, and restricted cash ( 58,119 ) 52,609 ( 43,258 )

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Net cash received (paid) for:

Interest $ ( 54,256 ) $ ( 58,250 ) $ ( 28,186 )

Taxes 190 ( 136 ) ( 49 )

Non-cash investing and financing activities:

Accrued capital expenditures $ 4,686 $ 6,386 $ 6,199

Value of warrants reclassified to equity 3,936 — —

ROU assets obtained in exchange for new finance lease liabilities 3,476 963 1,678

ROU assets obtained in exchange for new operating lease liabilities 22,529 79,382 —

ROU assets terminated in exchange for release from finance lease liabilities — — —

ROU assets terminated in exchange for release from operating lease liabilities 7,738 193 —

Common stock issued for business combination — 36,980 —

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(in thousands)

Comprehensive

Additional Other

Common Stock Paid-In Accumulated Comprehensive Total

Shares Amount Capital Deficit Income Equity

Balance, January 1, 2018 45,776 $ 458 $ 593,295 $ ( 148,178 ) $ 2,144 $ 447,719

Stock-based compensation

Purchase of common stock for retirement

Other comprehensive loss

Balance, December 31, 2017

Issuance of common stock in connection with acquisition 1,108 11 19,307 — — 19,318

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Other comprehensive income — — — — 529 529

Net income — — — 39,427 — 39,427

Balance, December 31, 2018 46,984 470 617,937 ( 108,751 ) 2,673 512,329

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Other comprehensive loss — — — — ( 2,091 ) ( 2,091 )

Net income — — — 40,809 — 40,809

Balance, December 31, 2019 53,254 533 715,069 ( 67,942 ) 582 648,242

Issuance of common stock for employee stock purchase plan 145 2 1,551 — — 1,553

Exercise of common stock warrants 351 3 3,933 — — 3,936

Stock-based compensation 322 3 7,106 — — 7,109

Purchase of common stock for retirement ( 69 ) ( 1 ) ( 1,155 ) — — ( 1,156 )

Other comprehensive loss — — — — ( 4,324 ) ( 4,324 )

Net loss — — — ( 409,086 ) — ( 409,086 )

Balance, December 31, 2020 54,003 $ 540 $ 726,504 $ ( 477,028 ) $ ( 3,742 ) $ 246,274

________________________________________

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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 (“Mbpd”).

Our refineries in Kapolei, Hawaii produce ultra-low sulfur diesel (“ULSD”), gasoline, jet fuel, marine fuel, low sulfur fuel oil (“LSFO”), and other associated refined products primarily for consumption in Hawaii.

1) Refining - We own and operate four refineries, including one idled refinery, with total operating throughput capacity of over 150 thousand barrels per day (“Mbpd”).

Our operational refinery in Kapolei, Hawaii, produces ultra-low sulfur diesel (“ULSD”), gasoline, jet fuel, marine fuel, low sulfur fuel oil (“LSFO”), and other associated refined products primarily for consumption in Hawaii.

We idled the smaller of our two Kapolei refineries in the first quarter of 2020 for economic reasons.

Our refinery in Newcastle, Wyoming, produces gasoline, ULSD, jet fuel, and other associated refined products that are primarily marketed in Wyoming and South Dakota.

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2) Retail - We operate 123 retail outlets in Hawaii, Washington, and Idaho.

Our retail outlets in Hawaii sell gasoline, diesel, and retail merchandise throughout the islands of Oahu, Maui, Hawaii, and Kauai.

Our fuel retail outlets in Hawaii sell gasoline and diesel throughout the islands of Oahu, Maui, Hawaii, and Kauai.

We operate convenience stores at 34 of our Hawaii retail fuel outlets that sell merchandise such as soft drinks, prepared foods, and other sundries.

Our Hawaii retail network includes Hele and “76” branded retail sites, company-operated convenience stores, 7-Eleven operated convenience stores, other sites operated by third parties, and unattended cardlock stations.

In addition to the rebranding of 40 of our fueling stations in Hawaii to Hele as of December 31, 2019 , we rebranded 28 of our 34 company-operated convenience stores in Hawaii to “nomnom,” a new proprietary brand.

Our retail outlets in Washington and Idaho sell gasoline, diesel, and retail merchandise and operate under the “ Cenex® ” and “ Zip Trip® ” brand names.

42 of our sites operate under our proprietary Hele (the Hawaiian word for movement or “let’s go”) fuel brand.

Our eight cardlock locations on Kauai are branded Kauai Automated Fuels (“KAF”).

Through December 31, 2020, we completed the rebranding of all of our 34 company-operated convenience stores in Hawaii to “nomnom,” a new proprietary brand.

As of December 31, 2020, most of our retail outlets in Washington and Idaho continued to operate under the “Cenex®” and “Zip Trip®” brand names.

A rebranding of those sites to our proprietary “nomnom” brand began in December 2020 and the rebranding of four sites was completed as of December 31, 2020.

As part of the Northwest Retail Acquisition, Par and CHS, Inc.

entered into a multi-year branded petroleum marketing agreement for the continued supply of Cenex®-branded refined products to the 33 acquired Cenex® Zip Trip convenience stores.

As these stores are rebranded, Par will begin self-supplying the fuel with equity barrels and/or unbranded fuels procured in the open market.

3) Logistics - We operate an extensive multi-modal logistics network spanning the Pacific, the Northwest, and the Rockies.

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We own and operate a crude oil pipeline gathering system, a refined products pipeline, storage facilities, and loading racks in Wyoming and a jet fuel storage facility and pipeline that serve Ellsworth Air Force Base in South Dakota.

We own and operate logistics assets in Washington, including a marine terminal, a unit train-capable rail loading terminal, storage facilities, a truck rack, and a proprietary pipeline that serves McChord Air Force Base.

As of December 31, 2020, we owned a 46.0 % equity investment in Laramie Energy, LLC (“Laramie Energy”), a joint venture entity operated by Laramie Energy II, LLC (“Laramie”).

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All intercompany balances and transactions have been eliminated in consolidation.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

Certain amounts previously reported in our consolidated financial statements for prior periods have been reclassified to conform to the current presentation.

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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.

Cash and Cash Equivalents

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The carrying value of cash equivalents approximates fair value because of the short-term nature of these investments.

PAR PACIFIC HOLDINGS, INC.

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Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

Restricted Cash

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Restricted cash relates to cash held at commercial banks to support letter of credit facilities and certain ongoing bankruptcy recovery trust claims.

Allowance for Doubtful Accounts

We establish provisions for losses on trade receivables if it becomes probable that we will not collect all or part of the outstanding balances.

We review collectibility and establish or adjust our allowance as necessary using the specific identification method.

As of December 31, 2019 and 2018 , we did not have a significant allowance for doubtful accounts.

Commodity inventories, excluding commodity inventories at the Washington refinery, are stated at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) inventory accounting method.

Commodity inventories at the Washington refinery are stated at the lower of cost or net realizable value using the last-in, first-out (“LIFO”) inventory accounting method.

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 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 years ended December 31, 2020, 2019, or 2018.

Commodity inventories, excluding commodity inventories at the Washington refinery, are stated at the lower of cost and net realizable value using the first-in, first-out (“FIFO”) inventory accounting method.

Commodity inventories at the Washington refinery are stated at the lower of cost and net realizable value using the last-in, first-out (“LIFO”) inventory accounting method.

We value merchandise along with spare parts, materials, and supplies at average cost.

As of December 31, 2019 , the excess of current replacement cost over LIFO inventory carrying value at the Washington refinery was approximately $ 6.4 million .

All of the crude oil utilized at the Hawaii refineries is financed by J.

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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 same, exclusively to MLC.

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Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

We enter into refined product and crude oil exchange agreements with other oil companies.

Exchange receivables or payables are stated at cost and are presented within Trade accounts receivable and Accounts payable on our consolidated balance sheets.

Renewable Identification Numbers

Beginning in 2018, Inventories also include Renewable Identification Numbers (“RINs”) , sulfur credits, and other environmental credits.

Our RINs assets, which include RINs purchased in the open market and RINs obtained by purchasing biofuels, which are blended into our refined products, are presented as Inventories on our consolidated balance sheets and stated at the lower of cost or net realizable value (“NRV”) as of the end of the reporting period.

Our RINs obligations to comply with the Renewable Fuel Standard (“RFS”) (discussed in Note 16—Commitments and Contingencies ) are presented as Other accrued liabilities on our consolidated balance sheets and measured at fair value as of the end of the reporting period.

Our sulfur credits and other environmental credits generated as part of our refining process are presented as Inventories on our consolidated balance sheets and stated at the lower of cost or NRV as of the end of the reporting period.

The net cost of environmental credits is recognized within Cost of revenues (excluding depreciation) in our consolidated statements of operations.

Environmental Credits and Obligations

Inventories also include Renewable Identification Numbers (“RINs”), sulfur credits, and other environmental credits.

Our RINs assets, which include RINs purchased in the open market and RINs obtained by purchasing biofuels which are later blended into our refined products, are presented as Inventories on our consolidated balance sheets and stated at the lower of cost and net realizable value (“NRV”) as of the end of the reporting period.

Our renewable volume obligation and other environmental credit obligations to comply with the U.S.

Environmental Protection Agency (“EPA”) regulations (as discussed in Note 17—Commitments and Contingencies) are presented in Other accrued liabilities on our consolidated balance sheets and measured at fair value as of the end of the reporting period.

The net cost of environmental credits is recognized within Cost of revenues (excluding depreciation) on our consolidated statements of operations.

Investment in Laramie Energy, LLC

We account for our Investment in Laramie Energy, LLC using the equity method as we have the ability to exert significant influence, but do not control its operating and financial policies.

Our proportionate share of net income (loss) of this entity is included in Equity earnings (losses) from Laramie Energy, LLC in the consolidated statements of operations.

Prior to June 30, 2020, we accounted for our Investment in Laramie Energy, LLC using the equity method as we have the ability to exert significant influence, but do not control its operating and financial policies.

Our proportionate share of the net income (loss) of this entity was included in Equity earnings (losses) from Laramie Energy, LLC in the consolidated statements of operations.

As of June 30, 2020, we discontinued the application of the equity method of accounting for our investment in Laramie Energy because the book value of such investment had been reduced to zero.

The investment is reviewed for impairment when events or changes in circumstances indicate that there may have been an other-than-temporary decline in the value of the investment.

During the year ended December 31, 2019, we recorded an impairment charge of $ 81.5 million on our consolidated statement of operations due to the significant decline in natural gas prices during the second and third quarters of 2019.

During the years ended December 31, 2020 and 2019, we recorded impairment charges of $ 45.3 million and $ 81.5 million in our consolidated statement of operations due to the significant decline in natural gas prices during the first quarter of 2020 and during the second and third quarters of 2019, respectively.

Please read Note 3—Investment in Laramie Energy, LLC for further information.

PAR PACIFIC HOLDINGS, INC.

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Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

Property, Plant, and Equipment

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We compute depreciation of property, plant, and equipment using the straight-line method, based on the estimated useful life of each asset as follows:

Lives in Years

We review property, plant, and equipment, operating leases, and other long-lived assets for impairment whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable.

Assets Lives in Years

Refining 2 to 47

Logistics 3 to 30

Retail 3 to 40

Corporate 3 to 7

Software 3 to 5

Impairment of Long-Lived Assets

We review property, plant, and equipment, operating leases, deferred turnaround costs, and other long-lived assets for impairment whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable.

Impairment is indicated when the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying value.

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Factors that indicate potential impairment include a significant decrease in the market value of the asset, operating or cash flow losses associated with the use of the asset, and a significant change in the asset’s physical condition or use.

Lease Assets and Liabilities

On January 1, 2019, we adopted Accounting Standards Update (“ASU”) No.

2016-02, Leases (Topic 842) , as amended by other ASUs issued through February 2019 (“ASU 2016-02” or “ASC 842”), using the modified retrospective transition method.

Under this optional transition method, information presented prior to January 1, 2019 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.

Simultaneously with our review of our property, plant, and equipment, operating leases, deferred turnaround costs, and other long-lived assets for impairment, we evaluate whether an abandonment has occurred.

Abandonment occurs either when a business terminates its operations or an asset is no longer profitable to operate.

When the act of abandonment occurs, we

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

determine if the assets have a shortened useful life or should be considered abandoned and accelerate depreciation or write off the asset balance and any associated accumulated depreciation and record an impairment loss.

Lease Liabilities and Right-of-Use Assets

We determine whether a contract is or contains a lease when we have the right to control the use of the identified asset in exchange for consideration.

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Leases with an initial term of 12 months or less are not recorded on the balance sheet.

Finance lease ROU assets are presented within Property, plant, and equipment and Operating lease ROU assets within Operating lease assets on our consolidated balance sheets.

Finance lease ROU assets are presented within Property, plant, and equipment and operating lease ROU assets within Operating lease right-of-use assets on our consolidated balance sheets.

Please read Note 16—Leases for further disclosures and information on leases.

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We estimate settlement dates by considering our past practice, industry practice, contractual terms, management’s intent, and estimated economic lives.

We cannot currently estimate the fair value for certain AROs primarily because we cannot estimate settlement dates (or range of dates) associated with these assets.

These AROs include hazardous materials disposal (such as petroleum manufacturing

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

by-products, chemical catalysts, and sealed insulation material containing asbestos) and removal or dismantlement requirements associated with the closure of our refining facilities, terminal facilities, or pipelines, including the demolition or removal of certain major processing units, buildings, tanks, pipelines, or other equipment.

We cannot currently estimate the fair value for certain AROs primarily because we cannot estimate settlement dates (or ranges of dates) associated with these assets.

These AROs include hazardous materials disposal (such as petroleum manufacturing by-products, chemical catalysts, and sealed insulation material containing asbestos) and removal or dismantlement requirements associated with the closure of our refining facilities, terminal facilities, or pipelines, including the demolition or removal of certain major processing units, buildings, tanks, pipelines, or other equipment.

Deferred Turnaround Costs

Refinery turnaround costs, which are incurred in connection with planned major maintenance activities at our refineries, are deferred and amortized on a straight-line basis over the period of time estimated until the next planned turnaround (generally three to five years ).

During 2019 , we recognized deferred turnaround costs of approximately $ 9.8 million .

No deferred turnaround costs were recorded during 2018 and 2017 .

During 2020 and 2019, we recognized deferred turnaround costs of approximately $ 49.8 million and $ 9.8 million, respectively.

No deferred turnaround costs were recorded during 2018.

Deferred turnaround costs are presented within Other long-term assets on our consolidated balance sheets.

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If the carrying value exceeds the estimated fair value of the reporting unit, an impairment loss is recorded.

During the year ended December 31, 2020, we recorded goodwill impairment charges of $ 67.9 million related to our Refining and Retail segments.

Please read Note 10—Goodwill and Intangible Assets for further discussion on the goodwill impairment.

PAR PACIFIC HOLDINGS, INC.

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Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

Our intangible assets include relationships with customers, trade names, and trademarks.

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Therefore, we did not recognize the unrealized gains or losses related to these contracts in our consolidated financial statements.

We apply the accrual method of accounting to our forward contracts.

All derivative instruments not designated as normal purchases or sales are recorded in the balance sheet as either assets or liabilities measured at their fair values.

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In addition, we may have other financial instruments, such as warrants or embedded debt features, that may be classified as liabilities when either (a) the holders possess rights to net cash settlement, (b) physical or net equity settlement is not in our control, or (c) the instruments contain other provisions that cause us to conclude that they are not indexed to our equity.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

embedded derivatives include:

Our embedded derivatives include:

our obligations to repurchase crude oil and refined products from J.

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The realizability of deferred tax assets is evaluated quarterly based on a “more likely than not” standard and, to the extent this threshold is not met, a valuation allowance is recorded.

We have determined that any uncertain tax positions outstanding at December 31, 2019 and 2018 would not have a material impact on our financial condition, results of operations, or cash flows as any uncertain tax positions taken would have been fully covered by the Company’s deferred tax assets related to its historical net operating losses and corresponding valuation allowance.

We have determined that any uncertain tax positions outstanding at December 31, 2020 and 2019 would not have a material impact on our financial condition, results of operations, or cash flows as any uncertain tax positions taken would have

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

been fully covered by the Company’s deferred tax assets related to its historical net operating losses and corresponding valuation allowance.

As a general rule, our open years for Internal Revenue Service (“IRS”) examination purposes are 2017, 2018, and 2019.

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Revenue Recognition

On January 1, 2018, we adopted ASU No.

2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09” or “ASC 606”), as amended by other ASUs, using the modified retrospective method applied to all contracts that were not completed as of January 1, 2018.

As such, the comparative financial information for prior periods has not been adjusted and continues to be reported under Financial Accounting Standards Board (“FASB”) ASC Topic 605, Revenue Recognition (“ASC 605”).

We did not identify any significant differences in our existing revenue recognition policies that require modification under the new standard;

therefore, we did not recognize a cumulative adjustment on opening equity as of January 1, 2018.

Refining and Retail

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We recognize revenues upon physical delivery of refined products to a customer, which is the point in time at which control of the refined products is transferred to the customer.

The pricing of our refined products is variable and primarily driven by commodity prices.

The refining segment’s contracts with its customers state the terms of the sale, including the description, quantity, delivery terms, and price of each product sold.

Payments from customers are generally due in full within 2 to 30 days of product delivery or invoice date.

We account for certain transactions on a net basis under FASB ASC Topic 845, “Nonmonetary Transactions.” These transactions include nonmonetary crude oil and refined product exchange transactions, certain crude oil buy/sell arrangements, and sale and purchase transactions entered into with the same counterparty that are deemed to be in contemplation with one another.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

Upon adoption of ASC 606, we made an accounting policy election to apply the sales tax practical expedient, whereby all taxes assessed by a governmental authority that are both imposed on and concurrent with a revenue-producing transaction and collected from our customers will be recognized on a net basis within Cost of revenues (excluding depreciation).

This change in our accounting policy did not have a material impact on our consolidated financial information for the years ended December 31, 2019 and 2018.

Payments from refining and bulk retail customers are generally due in full within 2 to 30 days of product delivery or invoice date.

Payments for our other retail customers occur at the point of sale and are typically collected in cash or occur by credit or debit card.

As such, we have no significant financing element to our revenues and have immaterial product returns and refunds.

We account for certain transactions on a net basis under Financial Accounting Standards Board (“FASB”) ASC Topic 845, “Nonmonetary Transactions.” These transactions include nonmonetary crude oil and refined product exchange transactions, certain crude oil buy/sell arrangements, and sale and purchase transactions entered into with the same counterparty that are deemed to be in contemplation with one another.

We made an accounting policy election to apply the sales tax practical expedient, whereby all taxes assessed by a governmental authority that are both imposed on and concurrent with a revenue-producing transaction and collected from our customers will be recognized on a net basis within Cost of revenues (excluding depreciation).

This accounting policy did not have a material impact on our consolidated financial information for the years ended December 31, 2020, 2019, and 2018.

We recognize transportation and storage fees as services are provided to a customer.

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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 RINs obligations, and certain hydrocarbon fees and taxes.

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 environmental credit obligations, and certain hydrocarbon fees and taxes.

Cost of revenues (excluding depreciation) also includes the unrealized gains (losses) on derivatives and inventory valuation adjustments.

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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.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

The following table summarizes depreciation and finance lease amortization expense excluded from each line item in our consolidated statements of operations (in thousands):

Year Ended December 31,

2020 2019 2018

Cost of revenues $ 21,755 $ 16,882 $ 6,722

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We recognize an asset for the overfunded status or a liability for the underfunded status of our defined benefit pension plans.

The funded status is recorded within Other long-term liabilities.

The funded status is recorded within Other liabilities on our consolidated balance sheets.

Certain changes in the plans’ funded status are recognized in Other comprehensive income (loss) in the period the change occurs.

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The three levels of the fair value hierarchy are as follows:

Assets or liabilities for which the item is valued based on quoted prices (unadjusted) for identical assets or liabilities in active markets.

Assets or liabilities valued based on observable market data for similar instruments.

Level 1 – Assets or liabilities for which the item is valued based on quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 – Assets or liabilities valued based on observable market data for similar instruments.

Level 3 – Assets or liabilities for which significant valuation assumptions are not readily observable in the market;

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Aron repurchase obligation derivative is measured using estimates of the prices and differentials assuming settlement at the end of the reporting period.

PAR PACIFIC HOLDINGS, INC.

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Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

Income (Loss) Per Share

Basic income (loss) per share (“EPS”) 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 warrants.

The common stock warrants are included in the calculation of basic EPS because they are issuable for minimal consideration.

The common stock warrants were included in the calculation of basic EPS because they were issuable for minimal consideration.

Basic and diluted EPS are computed taking into account the effect of participating securities.

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dollar, which is our functional currency.

Gains and losses resulting from changes in currency exchange rates between the functional currency and the currency in which a transaction is denominated are included in Other income (expense), net , in the accompanying consolidated statement of operations in the period in which the currency exchange rates change.

Gains and losses resulting from changes in currency exchange rates between the functional currency and the currency in which a transaction is denominated are included in Other income, net, in the accompanying consolidated statement of operations in the period in which the currency exchange rates change.

Accounting Principles Not Yet Adopted

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).

This ASU 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.” The guidance in this ASU is effective for fiscal years and interim periods beginning after December 15, 2019, with early adoption permitted, and primarily requires adoption on the modified retrospective transition method.

On January 1, 2020, we adopted this ASU and our adoption did not have a material impact on our financial condition, results of operations, cash flows, or related disclosures.

In January 2017, the FASB issued ASU No.

2017-04, Intangibles—Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which eliminates Step 2 from the current goodwill impairment test.

Under ASU 2017-04, an entity is no longer required to determine 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.

The guidance in this ASU is effective for fiscal years and interim periods beginning after December 15, 2019, with early adoption permitted.

This ASU should be applied prospectively from the date of adoption.

This ASU will change the policy under which we perform our annual goodwill impairment assessment by eliminating Step 2 of the test.

In August 2018, the FASB issued ASU No.

2018-13, Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement ( “ ASU 2018-13”).

This ASU amends, adds, and removes certain disclosure requirements under FASB ASC Topic 820 “Fair Value Measurement.” The guidance in ASU 2018-13 is effective for fiscal years and interim periods beginning after December 15, 2019, with early adoption permitted.

This ASU will result in expanded disclosures within our interim and annual footnote disclosures, however, we do not expect the adoption of ASU 2018-13 to have a material impact on our financial condition, results of operations, or cash flows.

In August 2018, the FASB issued ASU No.

2018-14, Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans ( “ ASU 2018-14”).

This ASU amends, adds, and removes certain disclosure requirements under FASB ASC Topic 715 “Compensation — Retirement Benefits.” The guidance in ASU 2018-14 is effective for fiscal years beginning after December 15, 2020, with early adoption permitted.

This ASU will result in expanded disclosures within our interim and annual footnote disclosures, however, we do not expect the adoption of ASU 2018-14 to have a material impact on our financial condition, results of operations, or cash flows.

In August 2018, the FASB issued ASU No.

2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract ( “ ASU 2018-15”).

This ASU requires 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 guidance in ASU 2018-15 is effective for fiscal years and interim periods beginning after December 15, 2019, with early adoption permitted.

On January 1, 2020, we adopted ASU 2018-15 under 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.

The adoption of ASU 2018-15 did not have a material impact on our financial condition, results of operations, or cash flows.

In March 2020 and January 2021, the 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”) and ASU No.

2021-01, Reference Rate Reform (Topic 848) (“ASU 2021-01”), respectively.

These ASUs provide 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 and ASU 2021-01 are

PAR PACIFIC HOLDINGS, INC.

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For the Years Ended December 31, 2020, 2019, and 2018

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 and ASU 2021-01 would have on our financial condition, results of operations, and cash flows.

In December 2019, the FASB issued ASU No.

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Simplifying the Accounting for Income Taxes ( “ ASU 2019-12”).

The objective of ASU 2019-12 is to simplify the accounting for income taxes by removing certain exceptions to general principles and to clarify and amend guidance to improve consistency under FASB ASC 740 “Income Taxes.” The guidance in ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, with early adoption permitted.

We are in the process of determining the method(s) of adoption and the impact this guidance will have on our financial condition, results of operations, and cash flows.

The objective of ASU 2019-12 is to simplify the accounting for income taxes by removing certain exceptions to general principles and to clarify and amend guidance to improve consistency under FASB ASC Topic 740 “Income Taxes.” The guidance in ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, with early adoption permitted.

On January 1, 2021, we adopted ASU 2019-12 under the prospective method and information that was presented prior to January 1, 2021 has not been restated and continues to be reported under the accounting standards in effect for that period.

Our adoption of ASU 2019-12 did not have a material impact on our financial condition, results of operations, and cash flows.

Accounting Principles Adopted

On December 31, 2020, we adopted ASU No.

2018-14, Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans ( “ ASU 2018-14”), using the required retrospective transition method.

This ASU amended, added, and removed certain disclosure requirements under FASB ASC Topic 715 “Compensation — Retirement Benefits.” Our adoption of ASU 2018-14 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.

2016-02, Leases (Topic 842) , as amended by other ASUs issued through February 2019 (“ASU 2016-02” or “ASC 842”), using the modified retrospective transition method.

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 2016-02 required lessees to recognize a ROU asset and lease liability on the balance sheet for all rights and obligations created by leases.

The new standard provided a number of optional practical expedients.

We have elected:

the package of practical expedients, permitting us to carry forward our conclusions regarding lease identification, classification, and initial direct costs for contracts that commenced prior to the effective date;

the practical expedient pertaining to land easements, allowing us to account for existing land easements under our previous accounting policy;

the short-term lease exemption, which states that leases that are 12 months or less are exempt from balance sheet reporting;

the practical expedient that allows us to combine lease and non-lease components.

ASC 842 had a material impact on our consolidated balance sheet;

however, it did not materially impact our consolidated statement of operations or statement of cash flows.

As a result of the adoption of ASC 842, we recorded ROU assets and lease liabilities related to operating leases of $ 347 million and $ 349 million , respectively.

Our accounting for finance leases remained substantially unchanged.

Additionally, we acquired operating lease assets and lease liabilities of $ 62 million in connection with the Washington Acquisition (as defined in Note 4—Acquisitions ).

Please read Note 15—Leases for further disclosures and information.

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.

2018-02, Income Statement—Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ( “ ASU 2018-02”) and elected not to reclassify to retained earnings the stranded effects in Accumulated Other Comprehensive Income related to the changes in the statutory tax rate that were charged to income from continuing operations under the requirements of FASB ASC Topic 740, “Income Taxes.” The adoption of ASU 2018-02 did not have a material impact on our financial condition, results of operations, and cash flows.

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.

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 December 31, 2020, we owned a 46.0 % ownership interest in Laramie Energy, a joint venture entity focused on developing and producing natural gas in Garfield, Mesa, and Rio Blanco counties, Colorado.

Laramie Energy has a $ 400 million revolving credit facility secured by a lien on its natural gas and crude oil properties and related assets with a borrowing base currently set at $ 220 million .

Laramie Energy has a $ 400.0 million revolving credit facility secured by a lien on its natural gas and crude oil properties and related assets with a borrowing

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

base currently set at $ 139.7 million.

On November 20, 2020, Laramie Energy amended its revolving credit facility agreement whereby the borrowing base was reduced to $ 140.0 million, resulting in a borrowing base deficiency of $ 60.0 million.

In conjunction with the borrowing base deficiency, Laramie entered into a forbearance agreement through June 15, 2021 with its lenders.

As of December 31, 2020 and 2019, the balance outstanding on the revolving credit facility was approximately $ 139.7 million and $ 201.2 million, respectively.

As of December 31, 2020, the outstanding balance on the deficiency loan was $ 60.0 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.

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Laramie Energy’s credit facility matures on 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 consolidated statement of operations for the year ended December 31, 2020.

Please read Note 15—Fair Value Measurements for further information.

During the quarter ended June 30, 2020, Laramie Energy incurred additional losses that reduced the book value of our investment to zero and, as such, as of June 30, 2020, we discontinued the application of the equity method of accounting for our investment in Laramie Energy.

During the fourth quarter of 2019, Laramie Energy recorded an impairment loss of $ 355.2 million associated with the carrying value of proved reserves.

As a result of Laramie Energy ’s impairment loss and the liquidity impact associated with the maturity of the revolving credit facility in December 2020, we updated the impairment evaluation of our investment in Laramie Energy as of December 31, 2019.

As a result of Laramie Energy’s impairment loss and the liquidity impact associated with the previous maturity of the revolving credit facility in December 2020, we updated the impairment evaluation of our investment in Laramie Energy as of December 31, 2019.

The fair value estimate was determined using a discounted cash flow analysis based on reserves volumes and natural gas forward strip prices as of December 31, 2019.

Based on our evaluation, we determined that the estimated fair value of our investment in Laramie Energy approximates carrying value as of December 31, 2019.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

Based on our evaluation, we determined that the estimated fair value of our investment in Laramie Energy approximated carrying value as of December 31, 2019.

At September 30, 2019, we conducted an impairment evaluation of our investment in Laramie Energy because of the significant decline in natural gas prices over the second quarter of 2019 and continued deterioration in the third quarter of 2019.

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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 part of our evaluation, we considered the likelihood that Colorado Interstate Gas (CIG) prices, which have declined from an average spot price of $2.48 ($/MMBtu) in the first quarter of 2019, to $1.84 ($/MMBtu) in the second quarter of 2019 and $1.77 ($/MMBtu) in the third quarter of 2019, will recover in the near term.

Based on this significant decline in natural gas prices and the reduced likelihood that natural gas prices would recover in the near term, we concluded that the decline in the fair value of our investment in Laramie Energy was other than temporary.

As a result, we recorded an impairment charge of $ 81.5 million in Equity earnings (losses) from Laramie Energy, LLC on our statement of operations for the year ended December 31, 2019.

Based on the significant decline in natural gas prices and the reduced likelihood that natural gas prices would recover in the near term, we concluded that the decline in the fair value of our investment in Laramie Energy was other than temporary.

As a result, we recorded an impairment charge of $ 81.5 million in Equity earnings (losses) from Laramie Energy, LLC on our consolidated statement of operations for the year ended December 31, 2019.

Please read Note 15—Fair Value Measurements for further information.

On March 4, 2019, Laramie entered into a binding agreement to divest an insignificant amount of producing property for approximately $ 17.5 million.

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As a result of this transaction, our ownership interest in Laramie Energy decreased from 42.3 % to 39.1 %.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

The change in our equity investment in Laramie Energy is as follows (in thousands):

Year Ended December 31,

2020 2019 2018

Beginning balance $ 46,905 $ 136,656 $ 127,192

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________________________________________________________

(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 .

(2) Represents the reduction in our basis difference resulting from the asset impairment loss recorded by Laramie Energy for the year ended December 31, 2019.

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Non-current liabilities 93,193 85,287

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

Year Ended December 31,

2020 2019 2018

Natural gas and oil revenues $ 121,893 $ 193,906 $ 226,974

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Net income (loss) ( 22,589 ) ( 380,473 ) 6,347

Laramie Energy’s net loss for the year ended December 31, 2019 includes an asset impairment loss of $ 355.2 million .

Laramie Energy’s net loss for the year ended December 31, 2019 also includes $ 82.6 million and $ 4.3 million of DD&A expense and unrealized gains on derivative instruments, respectively.

Laramie Energy’s net loss for the year ended December 31, 2019 also includes an asset impairment loss of $ 355.2 million .

Laramie Energy’s net income for the year ended December 31, 2018 includes $ 66.6 million and $ 4.1 million of DD&A expense and unrealized losses on derivative instruments, respectively.

Laramie Energy’s net income for the year ended December 31, 2017 includes $ 50.3 million and $ 46.2 million of DD&A expense and unrealized gains on derivative instruments, respectively.

At September 30, 2019, our equity in the underlying net assets of Laramie Energy exceeded the carrying value of our investment by approximately $ 161.8 million .

This difference arose primarily due to other-than-temporary impairments of our equity investment in Laramie Energy.

As a result of Laramie Energy ’s $ 355.2 million impairment loss associated with the carrying value of proved reserves, there was no difference between our equity in the underlying net assets of Laramie Energy and the carrying value of our investment at December 31, 2019.

Laramie Energy’s net income (loss) includes (in thousands):

Year Ended December 31,

2020 2019 2018

Asset impairment loss $ — $ 355,220 $ —

Depreciation, depletion, and amortization 34,966 82,632 66,604

Unrealized (gain) loss on derivative instruments 4,245 ( 4,283 ) 4,063

Note 4— Acquisitions

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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 12—Debt for further information on the Term Loan B and Par Pacific Term Loan .

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

read Note 13—Debt for further information on the Term Loan B and Par Pacific Term Loan.

During December 2018 and January 2019, we incurred $ 4.2 million and $ 5.4 million of commitment fees associated with the funding of the Washington Acquisition, respectively.

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Goodwill recognized as a result of the Washington Acquisition is not expected to be deductible for income tax reporting purposes.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

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 assets

Operating lease right-of-use assets 62,337

Goodwill (1) 42,522

Total assets (2)

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Total liabilities

Total $ 326,527

______________________________________________

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(2) We allocated $ 403.9 million and $ 268.5 million of total assets to our refining and logistics segments, respectively.

During the period from March 31, 2019 to December 31, 2019 , the purchase price allocation was adjusted to record an increase in the property, plant, and equipment valuation of $ 2.1 million , a decrease in the deferred tax liability of $ 3.7 million , and a net decrease in working capital adjustments of $ 1.8 million .

Goodwill decreased $ 4.0 million as a result of these adjusting entries.

As of December 31, 2019, we finalized the Washington Acquisition purchase price allocation.

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These costs are included in Acquisition and integration costs on our consolidated statements of operations.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

The results of operations of U.S.

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Year Ended December 31,

Revenues $ 5,429,530 $ 4,709,850

Net income (loss) ( 4,547 ) 88,174

Income (loss) per share

Basic $ ( 0.09 ) $ 1.81

Diluted $ ( 0.09 ) $ 1.79

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 years ended December 31, 2019 and 2018

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

include adjustments to remeasure U.S.

The pro forma results for the years ended December 31, 2019 and 2018, 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 adjust U.S.

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These costs are included in Acquisition and integration costs on our consolidated statement of operations.

The Par West refinery was idled in the first quarter of 2020 due to the reduction in demand resulting from the COVID-19 global pandemic’s effect on the economy.

Please read Note 8—Property, Plant, and Equipment and Impairment of Long-Lived Assets and Note 15—Fair Value Measurements for further information.

Northwest Retail Acquisition

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within the Rocky Mountain and Pacific Northwest markets.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

We accounted for the acquisition of Northwest Retail as a business combination whereby the purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition.

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A summary of the fair value of the assets acquired and liabilities assumed is as follows (in thousands):

Inventories 4,138

Prepaid and other current assets 243

Property, plant, and equipment 30,230

Goodwill (1) 46,210

Accounts payable and other current liabilities ( 759 )

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Other non-current liabilities ( 487 )

Total $ 74,531

________________________________________________________

(1) The total goodwill balance of $ 46.2 million was allocated to our retail segment.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

As of December 31, 2018, we finalized the Northwest Retail Acquisition purchase price allocation.

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We have elected to apply a practical expedient not to disclose the value of unsatisfied performance obligations for (i) contracts with an original expected duration of less than one year and (ii) contracts where the variable consideration has been allocated entirely to our unsatisfied performance obligation.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

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):

Year Ended December 31, 2019

Year Ended December 31, 2020 Refining Logistics Retail

Product or service:

Gasoline $ 846,294 $ — $ 241,003

Distillates (1) 1,256,618 — 30,739

Other refined products (2) 753,591 — —

Merchandise — — 90,173

Transportation and terminalling services — 180,909 —

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Total segment revenues (3) $ 2,886,701 $ 180,909 $ 363,713

Year Ended December 31, 2018

Year Ended December 31, 2019 Refining Logistics Retail

Product or service:

Gasoline $ 1,416,706 $ — $ 326,304

Distillates (1) 2,503,981 — 40,189

Other refined products (2) 1,242,401 — —

Merchandise — — 90,480

Transportation and terminalling services — 199,226 —

Other revenue 4,854 — 1,916

Total segment revenues (3) $ 5,167,942 $ 199,226 $ 458,889

Year Ended December 31, 2018 Refining Logistics Retail

Product or service:

Gasoline $ 981,090 $ — $ 317,434

Distillates (1) 1,770,381 — 39,835

Other refined products (2) 458,596 — —

Merchandise — — 83,771

Transportation and terminalling services — 125,743 —

Total segment revenues (3) $ 3,210,067 $ 125,743 $ 441,040

_______________________________________________________

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Inventories at December 31, 2020 and 2019 consisted of the following (in thousands):

Titled Inventory

Supply and Offtake Agreements (1)

Titled Inventory Supply and Offtake Agreements (1) Total

December 31, 2020

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Warehouse stock and other (2) 70,461 — 70,461

Total $ 270,914 $ 158,941 $ 429,855

December 31, 2019

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Warehouse stock and other (2) 63,149 — 63,149

Total $ 308,832 $ 307,040 $ 615,872

_________________________________________________________

(1) Please read Note 11—Inventory Financing Agreements for further information.

Includes $ 19.1 million and $ 5.0 million of RINs and environmental credits as of December 31, 2019 and 2018 , respectively.

As of December 31, 2019 , there was no reserve for the lower of cost or net realizable value of inventory.

As of December 31, 2018 , there was a $ 3.8 million reserve for the lower of cost or net realizable value of inventory.

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 .

(2) Includes $ 26.7 million and $ 19.1 million of RINs and environmental credits, reported at cost, as of December 31, 2020 and 2019, respectively.

Our renewable volume obligation and other gross environmental credit obligations of $ 150.5 million and $ 22.8 million, reported at market value, are included in Other accrued liabilities on our consolidated balance sheets as of December 31, 2020 and 2019, respectively.

As of December 31, 2020, there was $ 10.6 million reserve for the lower of cost and net realizable value of inventory.

As of December 31, 2019, there was no reserve for the lower of cost and net realizable value of inventory.

Our LIFO inventories, net of the lower of cost or net realizable reserve, were equal to current cost as of December 31, 2020.

As of December 31, 2019, the current replacement cost exceeded the LIFO inventory carrying value by approximately $ 6.4 million.

Note 7— Prepaid and Other Current Assets

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Derivative assets 1,346 2,075

Other 6,881 5,604

Total $ 24,648 $ 59,156

_________________________________________________________

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For the Years Ended December 31, 2020, 2019, and 2018

Note 8— Property, Plant, and Equipment

Note 8— Property, Plant, and Equipment and Impairment of Long-Lived Assets

Major classes of property, plant, and equipment, including assets acquired under finance leases, consisted of the following (in thousands):

Land $ 188,096 $ 188,096

Buildings and equipment (1) 974,305 937,926

Other (1) 21,477 20,961

Total property, plant, and equipment 1,183,878 1,146,983

Proved oil and gas properties

Less accumulated depreciation, depletion, and amortization ( 251,113 ) ( 185,040 )

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______________________________________________________

Please read Note 15—Leases for further disclosures and information on leases.

(1) Please read Note 16—Leases for further disclosures and information on finance leases.

Depreciation and finance lease amortization expense was approximately $ 81.8 million, $ 75.2 million, and $ 39.0 million for the years ended December 31, 2020, 2019, and 2018, respectively.

The Par West refinery was idled in the first quarter of 2020 due to the reduction in demand resulting from the COVID-19 global pandemic’s effect on the economy.

Pursuant to GAAP accounting guidelines, this refinery was deemed abandoned in the fourth quarter of 2020 due to the following factors:

the idling of the assets for more than an insignificant amount of time, the significant cost to restart the refinery, and a lack of a current plan or timeline to restart the refinery.

As a result, in the year ended December 31, 2020, we recorded impairment charges of $ 10.7 million, $ 5.0 million, and $ 2.2 million in Impairment expense on our consolidated statement of operations related to the write-offs of Par West property, plant, and equipment, deferred turnaround costs, and inventory, respectively.

Please read Note 15—Fair Value Measurements for additional information.

Note 9— Asset Retirement Obligations

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Year Ended December 31,

2020 2019 2018

Beginning balance $ 10,180 $ 9,985 $ 9,103

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Acquisition of U.S.

Oil (1) 42,522

Balance at December 31, 2019 195,919

Impairment expense ( 67,922 )

Balance at December 31, 2020 $ 127,997

________________________________________________________

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For the Years Ended December 31, 2020, 2019, and 2018

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 consolidated statement of operations for the year ended December 31, 2020.

The goodwill impairment expense was allocated to the Refining segment ($ 38.1 million) and to the Retail segment ($ 29.8 million).

Intangible assets consisted of the following (in thousands):

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Customer relationships 32,064 32,064

Other 261 261

Total intangible assets 38,592 38,592

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Customer relationships 17,574 20,145

Other 261 261

Total intangible assets, net $ 18,892 $ 21,549

Amortization expense was approximately $ 2.7 million , $ 2.7 million , and $ 3.3 million for the years ended December 31, 2019 , 2018 , and 2017 , respectively.

Amortization expense was approximately $ 2.7 million for each of the years ended December 31, 2020, 2019, and 2018.

Our intangible assets related to customer relationships and trade names have an average useful life of 13.5 years.

Expected amortization expense for each of the next five years and thereafter is as follows (in thousands):

Year Ended Amount

Thereafter 8,539

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

Note 11— Inventory Financing Agreements

The following table summarizes our outstanding obligations under our inventory financing agreements (in thousands):

Supply and Offtake Agreements

$ 312,185 $ 517,001

Washington Refinery Intermediation Agreement 111,501 139,161

Obligations under inventory financing agreements $ 423,686 $ 656,162

Supply and Offtake Agreements

On June 1, 2015, we entered into several agreements with J.

Aron to support the operations of our Hawaii refineries (the “Supply and Offtake Agreements”).

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.

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Aron under this contractual undertakings agreement.

On December 21, 2017, in connection with the issuance of the 7.75% Senior Secured Notes , we amended and restated the Supply and Offtake Agreements to update the terms of the collateral.

On June 27, 2018, we and J.

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On December 5, 2018, we amended the Supply and Offtake Agreements to account for additional processing capacity expected to be provided through the Par West Acquisition.

The December 5, 2018 amendment to the Supply and Offtake Agreements also (i) required us to increase our margin requirements by

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

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”) in limited and restricted circumstances.

The December 5, 2018 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.

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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 on our consolidated balance sheets until processed and sold to a third party.

therefore, the crude oil and refined products inventories will continue to be included in our 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 years ended December 31, 2019 , 2018 , and 2017 , we incurred approximately $ 35.5 million , $ 21.5 million , and $ 13.7 million , respectively, of inventory intermediation fees related to the Supply and Offtake Agreements, which are included in Cost of revenues (excluding depreciation) on our consolidated statements of operations.

For the years ended December 31, 2019 , 2018 , and 2017 , Interest expense and financing costs, net on our consolidated statements of operations includes approximately $ 5.9 million , $ 4.5 million , and $ 2.3 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.

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In February 2016, we fixed the market fee for the period from December 1, 2016 through May 31, 2018 for $ 14.6 million to be settled in eighteen equal monthly payments.

In 2017, we fixed the market fee for the period from June 1, 2018 through May 2021 for an additional $ 2.2 million .

In 2017, we fixed the market fee for the period from

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

June 1, 2018 through May 2021 for an additional $ 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 pursuant to our Master Netting Agreement.

As of December 31, 2019 and 2018 , the receivable was $ 0.5 million and $ 2.5 million , respectively.

Aron was recorded as a reduction to our Obligations under inventory financing agreements as allowed under the Supply and Offtake Agreements.

As of both December 31, 2020 and 2019, the receivable was $ 0.5 million.

Washington Refinery Intermediation Agreement

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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.

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 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 .

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 February 11, 2021, we and MLC amended the Washington Refinery Intermediation Agreement and extended the term through March 31, 2022.

This amendment also includes transition guidance on the interest rate of the MLC receivable advances to be based on another industry standard benchmark rate that will be effective upon LIBOR’s scheduled retirement at the end of 2021.

Please read Note 24—Subsequent Events for additional information.

During the remaining term of the Washington Refinery Intermediation Agreement, MLC will make receivable advances to U.S.

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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 under the MLC receivable advances.

As of December 31, 2020 and 2019, our outstanding balance included in our Obligations under inventory financing agreements on our consolidated balance sheets under the MLC receivable advances was equal to our borrowing base of $ 41.1 million and $ 63.8 million, respectively.

Additionally, as of December 31, 2020 and 2019, we had approximately $ 93.6 million and $ 127.2 million in letters of credit outstanding through MLC’s credit support, respectively.

The following table summarizes the inventory intermediation fees, which are included in Cost of revenues (excluding depreciation) on our consolidated statements of operations, and Interest expense and financing costs, net related to the intermediation agreements (in thousands):

Year Ended December 31,

2020 2019 2018

Net fees and expenses:

Supply and Offtake Agreements

Inventory intermediation fees $ 12,034 $ 35,459 $ 21,470

Interest expense and financing costs, net 3,044 5,863 4,493

Washington Refinery Intermediation Agreement

Inventory intermediation fees $ 4,112 $ 3,734 $ —

Interest expense and financing costs, net 2,791 6,359 —

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 14—Derivatives for further information.

PAR PACIFIC HOLDINGS, INC.

2 unchanged sentences

For the Years Ended December 31, 2020, 2019, and 2018

the November 1, 2019 amendment, the availability fee was amended to equal 0.75 % of the unused capacity under the MLC receivable advances .

As of December 31, 2019 , our outstanding balance under MLC receivable advances was equal to our borrowing base of $ 63.8 million .

Additionally, as of December 31, 2019 , we had approximately $ 127.2 million in letters of credit outstanding through MLC ’s credit support.

For the year ended December 31, 2019 , we incurred approximately $ 3.7 million of inventory intermediation fees related to the Washington Refinery Intermediation Agreement which are included in Cost of revenues (excluding depreciation) on our consolidated statements of operations.

For the year ended December 31, 2019 , Interest expense and financing costs, net on our consolidated statements of operations includes approximately $ 6.4 million of expenses related to the Washington Refinery Intermediation Agreement .

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 13—Derivatives for further information.

Note 12— Other Accrued Liabilities

Other accrued liabilities at December 31, 2020 and 2019 consisted of the following (in thousands):

Accrued payroll and other employee benefits $ 14,916 $ 22,828

Gross environmental credit obligations (1) 150,482 22,776

Other 34,230 39,140

Total $ 199,628 $ 84,744

______________________________________________________

(1) Gross environmental credit obligations are stated at market as of December 31, 2020 and 2019.

A portion of these obligations are expected to be settled with our RINs assets and other environmental credits, which are presented as Inventories on our consolidated balance sheet and are stated at the lower of cost and net realizable value.

The carrying costs of these assets were $ 26.7 million and $ 19.1 million as of December 31, 2020 and 2019, respectively.

Note 13— Debt

1 unchanged sentence

5.00 % Convertible Senior Notes due 2021

$ 48,665 $ 48,665

ABL Credit Facility due 2022 — —

Retail Property Term Loan due 2024 42,494 44,014

7.75 % Senior Secured Notes due 2025

ABL Credit Facility

Mid Pac Term Loan

Retail Property Term Loan

300,000 300,000

Term Loan B due 2026 228,125 240,625

12.875 % Senior Secured Notes due 2026

Mid Pac Term Loan due 2028 1,399 1,433

PHL Term Loan due 2030 5,840 —

Principal amount of long-term debt 731,523 634,737

4 unchanged sentences

Annual maturities of our long-term debt for the next five years and thereafter are as follows (in thousands):

Year Ended Amount Due

2021 $ 62,950

Thereafter 276,765

Total $ 731,523

Additionally, as of December 31, 2020 and 2019, we had approximately $ 1.7 million and $ 0.2 million in letters of credit outstanding under the ABL Credit Facility, respectively.

As of December 31, 2019 , we also had $ 3.6 million in cash-collateralized letters of credit and surety bonds outstanding.

Under the ABL Credit Facility , the indenture governing the 7.75% 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.

As of both December 31, 2020 and 2019, we also had $ 3.6 million in cash-collateralized letters of credit and surety bonds outstanding.

PAR PACIFIC HOLDINGS, INC.

2 unchanged sentences

For the Years Ended December 31, 2020, 2019, and 2018

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

1 unchanged sentence

(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 the Hawaii Retail Credit Facilities , the Wyoming Refining Credit Facilities , the Par Wyoming Holdings Credit Agreement , and the J.

Aron Forward Sale , and for general corporate purposes.

The 7.75% Senior Secured Notes bear interest at a rate of 7.750 % per year beginning December 21, 2017 (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 .

The net proceeds of $ 289.2 million (net of financing costs and original issue discount of 1 %) from the sale were used to repay certain previous credit facilities and a 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.

The indenture governing the 7.75% Senior Secured Notes contains restrictive covenants limiting the ability of Par Petroleum, LLC and its Restricted Subsidiaries (as defined in the indenture) to, among other things, incur additional indebtedness, issue certain preferred shares, create liens on certain assets to secure debt, sell or otherwise dispose of all or substantially all assets, or pay dividends.

2 unchanged sentences

In the future, the 7.75% Senior Secured Notes will be guaranteed on a senior secured basis by additional subsidiaries of Par Petroleum, LLC that guarantee material indebtedness of the Issuers or otherwise become obligated with respect to material indebtedness under a credit facility, subject to certain exceptions.

Term Loan B Facility due 2026

On January 11, 2019, the Issuers 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 the Term Loan B Facility, the lenders made a term loan to the borrowers in the amount of $ 250.0 million (“Term Loan B”) 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.

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 %.

The average effective interest rate for 2020 on the Term Loan B was 7.8 %.

In addition to the quarterly interest payments, the Term Loan B requires quarterly principal payments of $ 3.1 million.

The Term Loan B matures on January 11, 2026.

The obligations of the borrowers under the Term Loan B Facility are guaranteed by Par Petroleum, LLC’s and Par Petroleum Finance Corp.’s existing and future direct or indirect domestic subsidiaries and, by Par Pacific Holdings, Inc., with respect to principal and interest only.

The Term Loan B Facility is 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 Par Petroleum, LLC, Par Petroleum Finance Corp., and their subsidiary guarantors, but excluding certain property which is collateral under the ABL Credit Facility, the Supply and Offtake Agreements, and the Washington Refinery Intermediation Agreement.

12.875% Senior Secured Notes due 2026

On June 5, 2020, the Issuers completed the issuance and sale of $ 105.0 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.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

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.

ABL Credit Facility

8 unchanged sentences

The maturity date of the ABL Revolver is December 21, 2022, on which date all revolving loans will be due and payable in full.

The average effective interest rate for 2019 on the ABL Revolver loan was 4.3 % .

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

The average effective interest rate for 2020 and 2019 on the ABL Revolver loan was 2.3 % and 4.3 %, respectively.

The applicable margins for the ABL Credit Facility and advances under the ABL Revolver are as specified below:

Arithmetic Mean of Daily Availability (as a percentage of the borrowing base)

Applicable Margin for

LIBOR Loans and Base Rate Loans Subject to LIBOR Daily Floating Rate

Applicable Margin for

Level Arithmetic Mean of Daily Availability (as a percentage of the borrowing base) Applicable Margin for

LIBOR Loans and Base Rate Loans Subject to LIBOR Daily Floating Rate Applicable Margin for

Base Rate Loans Subject to the Prime Rate

1 >50% 1.75 % 0.75 %

2 >30% but ≤ 50%

2.00 % 1.00 %

2.25 % 1.25 %

The obligations of the ABL Borrowers are guaranteed by Par and Par Petroleum, LLC’s existing and future direct or indirect domestic subsidiaries that are not borrowers under the ABL Credit Facility.

The loans and letters of credit issued under the ABL Credit Facility are secured by a first-priority security interest in and lien on certain assets of the borrowers and the guarantors, including cash and cash equivalents and inventory, and excluding the assets of PHR and U.S.

Mid Pac Term Loan

On September 27, 2018 , Mid Pac Petroleum, LLC , now dissolved and whose assets are now included in PHL , our wholly owned subsidiary, entered into the Mid Pac Term Loan with American Savings Bank, FSB, which provided a term loan of up to $ 1.5 million .

We received the proceeds on October 18, 2018 , which were used to purchase certain retail property.

The Mid Pac Term Loan is scheduled to mature on October 18, 2028 .

The Mid Pac Term Loan is payable monthly, bears interest at an annual rate of 4.375 % , is secured by a first-priority lien on the real property purchased with the funds, including leases and rents on the property and the property’s fixed assets and fixtures, and is guaranteed by Par Petroleum, LLC .

5.00% Convertible Senior Notes Due 2021

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The Notes Offering included the exercise in full of an option to purchase an additional $ 15 million in aggregate principal amount of the 5.00% Convertible Senior Notes granted to the initial purchasers.

The net proceeds of $ 111.6 million (net of original issue discount of 3 % ) from the sale of the 5.00% Convertible Senior Notes were used to finance a portion of the acquisition of the Wyoming refinery and related logistics assets (the “ WRC Acquisition ”), to repay $ 5 million in principal amount of the Term Loan (as defined below), and for general corporate purposes.

The net proceeds of $ 111.6 million (net of original issue discount of 3 %) from the sale of the 5.00% Convertible Senior Notes were used to finance a portion of the acquisition of the Wyoming refinery and related logistics assets (the “WRC Acquisition”), to repay $ 5 million in principal amount of term loans, and for general corporate purposes.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

The 5.00% Convertible Senior Notes bear interest at a rate of 5.00 % per year beginning June 21, 2016 (payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2016) and will mature on June 15, 2021.

6 unchanged sentences

Please read Note 14—Derivatives for further information on embedded derivatives.

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 Par’s common stock

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

with a fair value of $ 74.3 million .

We recognized a loss of approximately $ 6.1 million related to the extinguishment of the repurchased 5.00% Convertible Senior Notes in the year ended December 31, 2019.

4 unchanged sentences

The deferred financing costs of $ 0.6 million related to 5.00% Convertible Senior Notes were allocated on a proportionate basis between Long-term debt and Additional paid-in capital on the consolidated balance sheet.

As of December 31, 2019 , the if-converted value was $ 14.2 million in excess of the outstanding principal amount of the 5.00% Convertible Senior Notes .

As of December 31, 2020, the if-converted value did no t exceed the outstanding principal amount of the 5.00% Convertible Senior Notes.

As of December 31, 2020, the outstanding principal amount of the 5.00% Convertible Senior Notes was $ 48.7 million, the unamortized discount and deferred financing cost was $ 1.4 million, and the carrying amount of the liability component was $ 47.3 million.

The unamortized discount and deferred financing costs will be amortized to Interest expense and financing costs, net over the term of the 5.00% Convertible Senior Notes.

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 the Term Loan B Facility , the lenders made a term loan to the borrowers in the amount of $ 250.0 million (“ Term Loan B ”) 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.

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 % .

The average effective interest rate for 2019 on the Term Loan B was 9.1 % .

In addition to the quarterly interest payments, the Term Loan B requires quarterly principal payments of $ 3.1 million .

The Term Loan B matures on January 11, 2026 .

The obligations of the borrowers under the Term Loan B Facility are guaranteed by Par Petroleum, LLC ’s and Par Petroleum Finance Corp.

’s existing and future direct or indirect domestic subsidiaries and, by Par Pacific Holdings, Inc.

, with respect to principal and interest only.

, and their subsidiary guarantors, but excluding certain property which is collateral under the ABL Credit Facility , the Supply and Offtake Agreements, and the Washington Refinery Intermediation Agreement .

Par Pacific Term Loan Agreement

On January 9, 2019 , we entered into a loan agreement (the “ Par Pacific Term Loan Agreement ”) with the Bank of Hawaii (“BOH”).

Pursuant to the Par Pacific Term Loan Agreement , BOH made a loan to the Company in the amount of $ 45.0 million (the “ Par Pacific Term Loan ”).

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 (the “Par Pacific Term Loan”).

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 average effective interest rate for 2019 on the Par Pacific Term Loan was 1.3 % .

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 terminated and repaid all amounts outstanding under the Par Pacific Term Loan Agreement on March 29, 2019 using the proceeds from 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 year ended December 31, 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 .

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

PAR PACIFIC HOLDINGS, INC.

2 unchanged sentences

For the Years Ended December 31, 2020, 2019, and 2018

The Retail Property Term Loan is guaranteed by Par and secured by a lien on substantially all of the assets of Par Property LLC , including a mortgage lien on 21 retail properties in Hawaii (the “ Portfolio Properties ”).

Certain covenants require us to maintain a loan-to-appraisal value of the Portfolio Properties ratio of not greater than 75 % and an annual debt yield of at least 9 % .

Par is also subject to a minimum liquidity covenant measured on the last day of each fiscal quarter.

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 % .

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 was guaranteed by Par and secured by a lien on substantially all of the assets of Par Property LLC, including a mortgage lien on 21 retail properties in Hawaii (the “Portfolio Properties”).

Certain covenants required us to maintain a loan-to-appraisal value of the Portfolio Properties ratio of not greater than 75 % and an annual debt yield of at least 9 %.

Par was also subject to a minimum liquidity covenant measured on the last day of each fiscal quarter.

The Retail Property Term Loan bore interest based on a floating rate equal to the applicable LIBOR for a one-month interest period plus 1.5 %.

The average effective interest rate for 2020 on the Retail Property Term Loan was 2.3 %.

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 .

Aron Forward Sale

As part of the May 8, 2017 amendment to the Supply and Offtake Agreements , we also entered into a $ 30 million forward sale of jet fuel to be delivered to J.

Aron over the amended term (“ J.

Aron Forward Sale ”).

The proceeds from the J.

Aron Forward Sale were used to pay a portion of the outstanding balance on the Term Loan (as defined below).

The cost of the J.

Aron Forward Sale was based upon an annual interest rate of 7 % .

Upon issuance of the 7.75% Senior Secured Notes on December 21, 2017 , we repaid in full and terminated the J.

Aron Forward Sale and recognized $ 0.3 million of costs associated with the termination of the agreement, which is included within Debt extinguishment and commitment costs on our consolidated statement of operations for the year ended December 31, 2017.

Par Wyoming Holdings Credit Agreement

On July 14, 2016 , in connection with the WRC Acquisition , Par Wyoming Holdings, LLC, our indirect wholly owned subsidiary, entered into the Par Wyoming Holdings Credit Agreement with certain lenders and Chambers Energy Management, LP, as agent, which provided for a single advance secured term loan to our subsidiary in the amount of $ 65.0 million (the “ Par Wyoming Holdings Term Loan ”) at the closing of the acquisition.

The proceeds of the Par Wyoming Holdings Term Loan were used to pay a portion of the consideration for the acquisition, to pay certain fees and closing costs, and for general corporate purposes.

The Par Wyoming Holdings Term Loan was originally scheduled to mature on July 14, 2021 .

The Par Wyoming Holdings Term Loan bore interest at a rate equal to three-month LIBOR plus an applicable interest margin.

With respect to cash interest, the applicable interest margin was at a rate per annum equal to 9.5 % .

With respect to paid-in-kind (“PIK”) interest, the applicable interest margin was at a rate per annum equal to 13 % .

Interest was payable in arrears on (a) the last day of each fiscal quarter, (b) the maturity date, and (c) the date of any repayment or prepayment of the Par Wyoming Holdings Term Loan .

Upon issuance of the 7.75% Senior Secured Notes on December 21, 2017 , we repaid in full and terminated the Par Wyoming Holdings Credit Agreement and recognized $ 5.2 million of costs associated with the termination of the agreement, which is included within Debt extinguishment and commitment costs on our consolidated statement of operations for the year ended December 31, 2017.

Wyoming Refining Credit Facilities

Wyoming Refining Company and its wholly owned subsidiary, Wyoming Pipeline Company, LLC , were borrowers (the “ Wyoming Refining Credit Facility Borrowers ”) under a Third Amended and Restated Loan Agreement dated as of April 30, 2015 (as amended, the “ Wyoming Refining Credit Facilities ”), with Bank of America, N.A., as the lender.

The Wyoming Refining Credit Facilities remained in place following the consummation of the WRC Acquisition .

On July 14, 2016 , and in connection with the consummation of the acquisition, the Wyoming Refining Credit Facilities were amended pursuant to a Third Amendment to Third Amended and Restated Loan Agreement (the “Third Loan Amendment”) and a Fourth Amendment to Third Amended and Restated Loan Agreement (the “Fourth Loan Amendment”).

Pursuant to the Third Loan Amendment, which was entered into immediately prior to the consummation of the acquisition, Black Elk Refining, LLC was released from all of its obligations under the Wyoming Refining Credit Facilities and Par Wyoming, LLC joined and became a party to the Wyoming Refining Credit Facilities and the applicable security agreement and guaranteed all obligations of the borrowers under the Wyoming Refining Credit Facilities .

The Fourth Loan Amendment was entered into immediately following the consummation of the acquisition and amended certain covenants in the Wyoming Refining Credit Facilities applicable to Par Wyoming, LLC and the Wyoming Refining Credit Facility Borrowers .

On August 7, 2017, we entered into an amendment to the Wyoming Refining Credit Facilities to extend the maturity date from April 30, 2018 until June 30, 2019.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

The Wyoming Refining Credit Facilities originally provided for (a) a revolving credit facility in the maximum principal amount at any time outstanding of $ 30 million (“ Wyoming Refining Senior Secured Revolver ”), subject to a borrowing base, which provided for revolving loans and for the issuance of letters of credit and (b) certain term loans that are fully advanced (“ Wyoming Refining Senior Secured Term Loan ”).

The Wyoming Refining Senior Secured Term Loan bore interest at a rate equal to monthly LIBOR plus 3.0 % .

The Wyoming Refining Senior Secured Term Loan required quarterly principal payments of $ 2.3 million .

Upon issuance of the 7.75% Senior Secured Notes on December 21, 2017 , we repaid in full and terminated the Wyoming Refining Credit Facilities and recognized $ 0.1 million of costs associated with the termination of the agreement, which is included within Debt extinguishment and commitment costs on our consolidated statement of operations for the year ended December 31, 2017.

Hawaii Retail Credit Facilities

On December 17, 2015 , we entered into the Hawaii Retail Credit Facilities in the form of a revolving credit facility up to $ 5 million (“ Hawaii Retail Revolving Credit Facilities ”) that provided for revolving loans and for the issuance of letters of credit and term loans (“ Hawaii Retail Term Loans ”) in the aggregate principal amount of $ 110 million .

The proceeds of the Hawaii Retail Term Loans were used to repay in full existing indebtedness under the previous credit facilities, to pay transaction fees and expenses, to repay a portion of existing indebtedness under the Term Loan (as defined below), and to facilitate a cash distribution to Par.

The Hawaii Retail Term Loans originally matured on December 17, 2022 and required principal payments of $ 2.75 million on the last business day of each fiscal quarter.

The Hawaii Retail Revolving Credit Facilities originally matured on December 17, 2020 .

The Hawaii Retail Term Loans and advances under the Hawaii Retail Revolving Credit Facilities bore interest at a fluctuating rate (i) during the periods such revolving loan or term loan, as applicable, equal to a Base Rate Loan, the Base Rate plus an applicable margin ranging from 1.50 % to 2.25 % , and (ii) during the periods such revolving loan or term loan, as applicable, equal to a Eurodollar Loan, the relevant Adjusted Eurodollar Rate for such Eurodollar Loan for the applicable interest period plus an applicable margin ranging from 2.50 % to 3.25 % .

The effective interest rate for 2017 on the outstanding loan was 4.0 % .

Upon issuance of the 7.75% Senior Secured Notes on December 21, 2017 , we repaid in full and terminated the Hawaii Retail Credit Facilities and recognized $ 1.2 million of costs associated with the termination of the agreement, which is included within Debt extinguishment and commitment costs on our consolidated statement of operations for the year ended December 31, 2017.

On July 11, 2014 , we and certain subsidiaries entered into a Delayed Draw Term Loan and Bridge Loan Credit Agreement (“Credit Agreement”), amending and restating a previous borrowing arrangement with the lenders, to provide us with a term loan of up to $ 50.0 million (“Term Loan”) and a bridge loan of up to $ 75.0 million (“Bridge Loan”).

The lenders under the Credit Agreement include ZCOF Par Petroleum Holdings, LLC, one of our significant stockholders.

Proceeds from the Term Loan were used to fund a deposit for the acquisition of Mid Pac, which was subsequently dissolved and whose assets are now owned by PHL , to pay transaction costs, and for working capital and general corporate purposes.

On June 15, 2016 , the Credit Agreement was amended to permit (i) the issuance of the 5.00% Convertible Senior Notes , (ii) the issuance of our 2.50 % convertible subordinated bridge notes (the “Bridge Notes”), and (iii) the WRC Acquisition .

We paid a consent fee of $ 2.5 million in connection with this amendment, $ 1.3 million of which was paid to an affiliate of Whitebox Advisors, LLC (“Whitebox”), previously one of our largest stockholders.

On June 21, 2016 , we repaid $ 5 million of the Term Loan pursuant to the terms of the amendment, $ 3.3 million of which was allocated to an affiliate of Whitebox.

Please read Note 22—Related Party Transactions for additional information.

The Term Loan originally matured on July 11, 2018 and bore interest at either 10 % per annum if paid in cash or 12 % per annum if paid in kind, at our election, and had an original issue discount of 5 % .

On June 30, 2017, we fully repaid the Term Loan and terminated the Credit Agreement.

A portion of the proceeds from the J.

Aron Forward Sale and cash flows from operations were used to repay the full amount outstanding.

We recorded Debt extinguishment and commitment costs of approximately $ 1.8 million related to unamortized deferred financing costs associated with the Term Loan in the year ended December 31, 2017.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

Principal and interest payments were payable monthly based on a 20 -year amortization schedule, principal prepayments were allowed subject to applicable prepayment penalties, and the remaining unpaid principal, plus any unpaid interest or other charges, was due on April 1, 2024, the maturity date of the Retail Property Term Loan.

On February 23, 2021, we terminated and repaid all amounts outstanding under the Retail Property Term Loan.

Please read Note 24—Subsequent Events to our consolidated financial statements under Item 8 of this Form 10-K for additional discussion on the repayment.

Mid Pac Term Loan

On September 27, 2018, PHL (which includes the assets of the dissolved entity formerly known as Mid Pac Petroleum, LLC), our wholly owned subsidiary, entered into the Mid Pac Term Loan with American Savings Bank, F.S.B., which provided a term loan of up to $ 1.5 million.

We received the proceeds on October 18, 2018, which were used to purchase certain retail property.

The Mid Pac Term Loan is scheduled to mature on October 18, 2028.

The Mid Pac Term Loan is payable monthly, bears interest at an annual rate of 4.375 %, is secured by a first-priority lien on the real property purchased with the funds, including leases and rents on the property and the property’s fixed assets and fixtures, and is guaranteed by Par Petroleum, LLC.

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 bore interest at a fixed rate of 2.750 % per annum.

Principal and interest payments were payable monthly based on a 25-year amortization schedule, principal prepayments were allowed with no prepayment charge, and the remaining principal, plus any unpaid interest or other charges, was due on April 15, 2030, the maturity date of the PHL Term Loan.

The PHL Term Loan was guaranteed by Par Petroleum, LLC.

On February 23, 2021, we terminated and repaid all amounts outstanding under the PHL Term Loan.

Please read Note 24—Subsequent Events to our consolidated financial statements under Item 8 of this Form 10-K for additional discussion on the repayment.

Cross Default Provisions

4 unchanged sentences

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.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

Note 14— Derivatives

15 unchanged sentences

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 expire at various dates through October 2020 .

Our open futures and OTC swaps expired in January 2021.

At December 31, 2020, our open commodity derivative contracts represented (in thousands of barrels):

Contract type

At December 31, 2019 , we also had option collars of 75 thousand barrels of crude oil per month that economically hedge our internally consumed fuel at our Hawaii refineries .

Contract type Purchases Sales Net

Futures 360 — 360

Swaps 1,190 ( 1,000 ) 190

Total 1,550 ( 1,000 ) 550

At December 31, 2020, we also had option collars that economically hedge 25 thousand barrels of crude oil per month of our internally consumed fuel at our Hawaii refineries.

These option collars have a weighted-average strike price ranging from a floor of $ 36.50 per barrel to a ceiling of $ 60.00 per barrel and expire in December 2021.

1 unchanged sentence

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

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

interest rate risk.

We may utilize interest rate swaps to manage our interest rate risk.

As of December 31, 2020, we had entered into an interest rate swap at an average fixed rate of 3.91 % in exchange for the floating interest rate 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 .

This swap was set to expire on April 1, 2024, the maturity date of the Retail Property Term Loan.

On February 23, 2021, we terminated and repaid all amounts outstanding under the Retail Property Term Loan and the related interest rate swap.

Please read Note 24—Subsequent Events to our consolidated financial statements under Item 8 of this Form 10-K for additional discussion on the repayment.

In February 2018, we terminated a separate $ 100 million floating interest rate swap originally maturing in March 2021, which resulted in a realized gain of $ 3.7 million for the year ended December 31, 2018.

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We have determined that the redemption option and the related make-whole premium 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 consolidated statements of operations.

As such, we have accounted for this embedded derivative at fair value with changes in the fair value recorded in Interest expense

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

and financing costs, net on our consolidated statements of operations.

As of December 31, 2020, this embedded derivative was deemed to have a de minimis fair value.

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Asset (Liability)

Commodity derivatives (1)

Prepaid and other current assets

Commodity derivatives

Other accrued liabilities

Aron repurchase obligation derivative

Obligations under inventory financing agreements

MLC terminal obligation derivative

Obligations under inventory financing agreements

Interest rate derivatives

Prepaid and other current assets

Interest rate derivatives

Other accrued liabilities

Interest rate derivatives

Other liabilities

Commodity derivatives (1) Prepaid and other current assets $ 1,346 $ 2,075

Commodity derivatives Other accrued liabilities — ( 5,534 )

Aron repurchase obligation derivative Obligations under inventory financing agreements ( 20,797 ) 173

MLC terminal obligation derivative Obligations under inventory financing agreements ( 10,161 ) ( 14,717 )

Interest rate derivatives Other accrued liabilities ( 966 ) ( 314 )

Interest rate derivatives Other liabilities ( 2,027 ) ( 1,113 )

_________________________________________________________

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Statement of Operations Classification 2020 2019 2018

Commodity derivatives

Cost of revenues (excluding depreciation)

Aron repurchase obligation derivative

Cost of revenues (excluding depreciation)

MLC terminal obligation derivative

Cost of revenues (excluding depreciation)

Interest rate derivatives

Interest expense and financing costs, net

Commodity derivatives Cost of revenues (excluding depreciation) $ ( 51,902 ) $ ( 1,547 ) $ ( 3,420 )

Aron repurchase obligation derivative Cost of revenues (excluding depreciation) ( 20,970 ) ( 3,912 ) 23,649

MLC terminal obligation derivative Cost of revenues (excluding depreciation) 39,820 ( 19,326 ) —

Interest rate derivatives Interest expense and financing costs, net ( 2,265 ) ( 1,506 ) 1,309

PAR PACIFIC HOLDINGS, INC.

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The fair values of the assets acquired and liabilities assumed as a result of the Washington Acquisition were estimated as of January 11, 2019, the date of the acquisition, using valuation techniques described in notes (1) through (6) below.

Fair Value Technique

(in thousands)

1 unchanged sentence

Property, plant, and equipment 412,766 (2)

Operating lease assets

Operating lease right-of-use assets 62,337 (3)

Goodwill 42,522 (4)

Current operating lease liabilities ( 21,571 ) (3)

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Other non-current liabilities ( 804 ) (6)

Total $ 326,527

(1) Current assets acquired and liabilities assumed were recorded at their net realizable value.

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Key assumptions in the market approach include determining the asset value by evaluating recent purchases of comparable assets under similar circumstances.

Operating lease assets and liabilities were recognized based on the present value of lease payments over the lease term using the incremental borrowing rate at acquisition of 9.6 % .

(3) Operating lease right-of-use assets and liabilities were recognized based on the present value of lease payments over the lease term using the incremental borrowing rate at acquisition of 9.6 %.

(4) The excess of the purchase price paid over the fair value of the identifiable assets acquired and liabilities assumed is allocated to goodwill.

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The fair values of the assets acquired and liabilities assumed as a result of the Northwest Retail Acquisition were estimated as of March 23, 2018, the date of the acquisition, using valuation techniques described in notes (1) through (5) below.

Fair Value Technique

(in thousands)

1 unchanged sentence

Property, plant, and equipment 30,230 (2)

Goodwill 46,210 (3)

Long-term capital lease obligations ( 5,244 ) (4)

Other non-current liabilities ( 487 ) (5)

Total $ 74,531

(1) Current assets acquired and liabilities assumed were recorded at their net realizable value.

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AROs are calculated based on the present value of the estimated removal and other closure costs using our credit-adjusted risk-free rate.

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.

The goodwill impairment expense was allocated to the Refining segment ($ 38.1 million) and to the Retail segment ($ 29.8 million).

We consider the impairment of our goodwill to be a Level 3 fair value measurement.

Investment in Laramie Energy

We evaluate equity method investments for impairment when factors indicate that a decrease in the value of our investment has occurred and the carrying amount of our investment may not be recoverable.

An impairment loss, based on the difference between the carrying value and the estimated fair value of the investment, is recognized in earnings when an impairment is deemed to be other than temporary.

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

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

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 part of our evaluation, we considered the likelihood that NYMEX Henry Hub prices, which declined from an average spot price of $2.29 ($/MMBtu) at December 31, 2019 to $2.03 ($/MMBtu) in the first quarter of 2020, will recover in the near term.

A discount rate of 10 % was used to reflect the higher cost of capital under the economic conditions as of March 31, 2020.

At September 30, 2019, we determined that the estimated fair value of our investment in Laramie Energy was $ 51.8 million, compared to a carrying value of $ 133.3 million.

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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 part of our evaluation, we considered the likelihood that Colorado Interstate Gas (“CIG”) prices, which have declined from an average spot price of $2.48 ($/MMBtu) in the first quarter of 2019, to $1.84 ($/MMBtu) in the second quarter of 2019 and $1.77 ($/MMBtu) in the third quarter of 2019, will recover in the near term.

As part of our evaluation, we considered the likelihood that Colorado Interstate Gas (“CIG”) prices, which declined from an average spot price of $2.48 ($/MMBtu) in the first quarter of 2019, to $1.84 ($/MMBtu) in the second quarter of 2019 and $1.77 ($/MMBtu) in the third quarter of 2019, will recover in the near term.

A discount rate of 8 % was used to reflect the cost of capital under the economic conditions as of September 30, 2019.

As a result, we recorded an impairment charge of $ 81.5 million on our statement of operations for the year ended December 31, 2019.

We consider this to be a Level 3 fair value measurement.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

We consider the impairments of our investment in Laramie Energy to be Level 3 fair value measurements.

Par West Refinery

Pursuant to GAAP accounting guidelines, the Par West refinery was deemed abandoned in the fourth quarter of 2020 due to the following factors:

the idling of the assets for more than an insignificant amount of time, the significant cost to restart the refinery, and a lack of a current plan or timeline to restart the refinery.

Given the lack of alternative uses of the Par West refinery assets, we impaired all assets that are not expected to be used as part of our ongoing refining operations in Hawaii down to their salvage value, which is immaterial.

As a result of this evaluation, we recorded an impairment charge of $ 17.9 million on our statement of operations for the year ended December 31, 2020.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Common stock warrants

As of December 31, 2019 and 2018 , we had 354,350 common stock warrants outstanding.

We estimate 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 and 2018 , the warrants had a weighted-average exercise price of $ 0.09 and $ 0.09 and a remaining term of 2.67 years and 3.67 years , respectively.

The estimated fair value of the common stock warrants was $ 23.16 and $ 14.13 per share as of December 31, 2019 and 2018 , respectively.

Increases in the value of our common stock will increase the value of the common stock warrants.

Likewise, decreases in the value of our common stock will result in a decrease in the value of the 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 was 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 December 31, 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 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 contain embedded derivatives, similar to forward purchase contracts of crude oil and refined products.

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 consolidated statements of operations.

Upon redemption of our 5.00% Convertible Senior Notes on or after June 20, 2019 at our election, we are obligated to pay a make-whole premium equal to the present value of the remaining scheduled payments of interest on the 5.00% Convertible Senior Notes to be redeemed from the relevant redemption date to the maturity date of June 15, 2021 .

We have determined that the redemption option and the related make-whole premium represent an embedded derivative that is not clearly and closely related to the 5.00% Convertible Senior Notes .

As of December 31, 2019 and 2018 , this embedded derivative was deemed to have a de minimis fair value.

We classify financial assets and liabilities according to the fair value hierarchy.

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Level 3 instruments are valued using significant unobservable inputs that are not supported by sufficient market activity.

The valuation of our J.

Aron repurchase and MLC terminal obligations embedded derivatives requires that we make estimates of the prices and differentials assuming settlement at the end of the reporting period.

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 and WTI indices, and unobservable inputs, such as contractual price differentials as defined in the Supply and Offtake Agreements and Washington Refinery Intermediation Agreement.

therefore they are classified as Level 3 instruments.

We do not have other commodity derivatives classified as Level 3 at December 31, 2019 or 2018 .

Please read Note 13—Derivatives for further information on derivatives.

Such contractual differentials vary by location and by the type of product and range from a discount of $ 10.57 per barrel to a premium of $ 16.54 per barrel as of December 31, 2020.

PAR PACIFIC HOLDINGS, INC.

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For the Years Ended December 31, 2020, 2019, and 2018

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 December 31, 2020 or 2019.

Please read Note 14—Derivatives for further information on derivatives.

Gross Environmental credit obligations

Estimates of our gross environmental credit obligations are based on the amount of RINs or other environmental credits required to comply with EPA regulations and the market prices of those RINs or other environmental credits as of the end of the reporting period.

The gross environmental credit obligations are classified as a Level 2 instruments as we obtain the pricing inputs for our RINs and other environmental credits from brokers based on market quotes on similar instruments.

Please read Note 17—Commitments and Contingencies for further information on the EPA regulations related to greenhouse gases.

Financial Statement Impact

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December 31, 2020

Gross Fair Value

Effect of Counter-party Netting

Net Carrying Value on Balance Sheet (1)

Level 1 Level 2 Level 3 Gross Fair Value Effect of Counter-party Netting Net Carrying Value on Balance Sheet (1)

Commodity derivatives $ 616 $ 1,573 $ — $ 2,189 $ ( 843 ) $ 1,346

Common stock warrants

Commodity derivatives $ ( 3 ) $ ( 840 ) $ — $ ( 843 ) $ 843 $ —

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Interest rate derivatives — ( 2,993 ) — ( 2,993 ) — ( 2,993 )

Gross environmental credit obligations (2) — ( 150,482 ) — ( 150,482 ) — ( 150,482 )

Total $ ( 3 ) $ ( 154,315 ) $ ( 30,958 ) $ ( 185,276 ) $ 843 $ ( 184,433 )

December 31, 2019

Gross Fair Value

Effect of Counter-party Netting

Net Carrying Value on Balance Sheet (1)

Level 1 Level 2 Level 3 Gross Fair Value Effect of Counter-party Netting Net Carrying Value on Balance Sheet (1)

Commodity derivatives $ 4,595 $ 2,075 $ — $ 6,670 $ ( 4,595 ) $ 2,075

Interest rate derivatives

Common stock warrants $ — $ — $ ( 8,206 ) $ ( 8,206 ) $ — $ ( 8,206 )

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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 )

Gross environmental credit obligations (2) — ( 22,776 ) — ( 22,776 ) — ( 22,776 )

Total $ ( 10,129 ) $ ( 24,203 ) $ ( 22,750 ) $ ( 57,082 ) $ 4,595 $ ( 52,487 )

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

_________________________________________________________

(1) Does not include cash collateral of $ 11.0 million and $ 19.8 million as of December 31, 2020 and 2019, respectively, included within Prepaid and other current assets and Other long-term assets on our consolidated balance sheets.

(2) Does not include RINs assets and other environmental credits of $ 26.7 million and $ 19.1 million presented as Inventories on our consolidated balance sheet and stated at the lower of cost and net realizable value as of December 31, 2020 and 2019, respectively.

A roll forward of Level 3 derivative instruments measured at fair value on a recurring basis is as follows (in thousands):

Year Ended December 31,

2020 2019 2018

Balance, beginning of period $ ( 22,750 ) $ ( 922 ) $ ( 26,372 )

Unrealized and realized income (loss) included in earnings

Settlements ( 31,328 ) 13,263 —

Acquired — ( 8,654 ) —

Total gains (losses) included in earnings 23,120 ( 26,437 ) 25,450

Balance, end of period $ ( 30,958 ) $ ( 22,750 ) $ ( 922 )

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

The carrying value and fair value of long-term debt and other financial instruments as of December 31, 2020 and 2019 are as follows (in thousands):

December 31, 2020

Carrying Value

Carrying Value Fair Value

5.00 % Convertible Senior Notes due 2021 (1) (3)

$ 47,301 $ 50,311

ABL Credit Facility due 2022 — —

Retail Property Term Loan due 2024 (2) 41,891 41,891

7.75 % Senior Secured Notes due 2025 (1)

Mid Pac Term Loan (2)

Term Loan B Facility (1)

Retail Property Term Loan (2)

Common stock warrants (2)

293,289 289,521

Term Loan B Facility due 2026 (1) 219,708 215,578

12.875 % Senior Secured Notes due 2026 (1)

99,213 112,901

Mid Pac Term Loan due 2028 (2) 1,399 1,399

PHL Term Loan due 2030 (2) 5,792 5,792

December 31, 2019

Carrying Value

Carrying Value Fair Value

5.00 % Convertible Senior Notes due 2021 (1) (3)

$ 44,783 $ 66,477

ABL Credit Facility due 2022 — —

Retail Property Term Loan due 2024 (2) 43,226 43,226

7.75 % Senior Secured Notes due 2025 (1)

Mid Pac Term Loan (2)

292,015 309,375

Term Loan B Facility due 2026 (1) 230,474 240,625

Mid Pac Term Loan due 2028 (2) 1,433 1,433

Common stock warrants (2) 8,206 8,206

_________________________________________________________

The fair value measurements of the 5.00% Convertible Senior Notes , 7.75% Senior Secured Notes , and Term Loan B Facility are considered Level 2 measurements in the fair value hierarchy as discussed below.

The fair value measurements of the common stock warrants, Mid Pac Term Loan , and Retail Property Term Loan are considered Level 3 measurements in the fair value hierarchy.

(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 fair value of the liability component of the 5.00% Convertible Senior Notes was

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

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 December 31, 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 and the Term Loan B Facility were determined using a market approach based on quoted prices.

The inputs used to measure the fair value are classified as Level 2 inputs within the fair value hierarchy because the 7.75% Senior Secured Notes and the Term Loan B Facility may not be actively traded.

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 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 is subject to a fixed interest rate that approximates the long-term treasury rate.

The carrying values of our Retail Property and Mid Pac Term Loans were determined to approximate fair value as of December 31, 2019 .

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 December 31, 2020.

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.

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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 ROU assets and liabilities as of December 31, 2020 and 2019 and their placement within our consolidated balance sheets:

Lease type Balance Sheet Location December 31, 2020 December 31, 2019

Finance Property, plant, and equipment $ 14,998 $ 11,552

Finance Accumulated amortization ( 6,486 ) ( 4,447 )

Finance Property, plant, and equipment, net $ 8,512 $ 7,105

Operating Operating lease right-of-use assets 357,166 420,073

Total right-of-use assets $ 365,678 $ 427,178

Finance Other accrued liabilities $ 1,491 $ 1,784

Operating Operating lease liabilities 56,965 79,999

Finance Finance lease liabilities 7,925 6,227

Operating Operating lease liabilities 304,355 340,909

Total lease liabilities $ 370,736 $ 428,919

Weighted-average remaining lease term (in years)

Finance 6.97 5.69

Operating 10.52 10.26

Weighted-average discount rate

Finance 7.93 % 6.68 %

Operating 7.59 % 7.88 %

PAR PACIFIC HOLDINGS, INC.

2 unchanged sentences

For the Years Ended December 31, 2020, 2019, and 2018

The following table provides information on the amounts (in thousands, except lease term and discount rates) of our leased assets and liabilities as of December 31, 2019 and their placement within our consolidated balance sheets:

Balance Sheet Location

December 31, 2019

Property, plant, and equipment

Accumulated amortization

Property, plant, and equipment, net

Operating lease assets

Total leased assets

Other accrued liabilities

Operating lease liabilities

Finance lease liabilities

Operating lease liabilities

Total lease liabilities

Weighted-average remaining lease term (in years)

Weighted-average discount rate

The following table summarizes the lease costs recognized on our consolidated statement of operations (in thousands):

Lease cost type

The following table summarizes the lease costs recognized in our consolidated statements of operations (in thousands):

Year Ended December 31,

Lease cost type 2020 2019

Finance lease cost

Amortization of finance lease assets

Amortization of finance lease ROU assets $ 2,007 $ 1,896

Interest on lease liabilities 654 521

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Net lease cost $ 120,645 $ 116,338

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

The following table summarizes the supplemental cash flow information related to leases as follows (in thousands):

Year Ended December 31,

Lease type 2020 2019

Cash paid for amounts included in the measurement of liabilities

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ROU assets obtained in exchange for new operating lease liabilities 22,529 79,382

ROU assets terminated in exchange for release from finance lease liabilities — —

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 December 31, 2020 (in thousands):

For the year ending December 31,

Finance leases

Operating leases

For the year ending December 31, Finance leases Operating leases Total

2021 $ 2,143 $ 82,212 $ 84,355

2022 1,942 68,605 70,547

2023 1,935 54,607 56,542

2024 1,624 44,812 46,436

2025 1,383 43,254 44,637

Thereafter 3,457 201,966 205,423

Total lease payments 12,484 495,456 507,940

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Present value of lease liabilities $ 9,416 $ 361,320 $ 370,736

Additionally, we have $ 9.0 million and $ 1.2 million in future undiscounted cash flows for three operating leases and three finance leases, respectively, that have not yet commenced.

Additionally, we have $ 6.6 million and $ 4.9 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 us to operate or begin construction, respectively.

Due to the transition method elected, information presented prior to January 1, 2019 has not been restated for ASC 842 and continues to be reported under the accounting standards in effect for the period.

Due to the transition method elected, information presented prior to January 1, 2019 has not been restated for FASB ASC 842 “Leases” and continues to be reported under the accounting standards in effect for the period.

As of December 31, 2018, we had capital lease obligations related primarily to the leases of 17 retail stations.

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Additionally, as of December 31, 2018, we had various cancelable and noncancelable operating leases related to land, vehicles, office and retail facilities, railcars, barges, and other facilities used in the storage, transportation, and sale of crude oil and refined products.

We had operating leases for most of our retail stations with an average of eight years remaining and generally contained renewal options and escalation clauses.

Leases for facilities used in the storage, transportation, and sale of crude oil and refined products had various expiration dates extending to 2044.

Rent expense for the years ended December 31, 2018 and 2017 was approximately $ 41.6 million and $ 41.2 million , respectively.

We had operating leases for most of our retail stations

PAR PACIFIC HOLDINGS, INC.

2 unchanged sentences

For the Years Ended December 31, 2020, 2019, and 2018

At December 31, 2018 , the estimated minimum lease payments for capital and operating leases with initial or remaining non-cancelable lease terms in excess of one year were as follows (in thousands):

Capital leases

Operating leases

Total minimum rental payments

Less amount representing interest

Present value of minimum rental payments

with an average of eight years remaining and generally contained renewal options and escalation clauses.

Leases for facilities used in the storage, transportation, and sale of crude oil and refined products had various expiration dates extending to 2044.

Rent expense for the year ended December 31, 2018 was approximately $ 41.6 million.

Note 17— Commitments and Contingencies

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On March 22, 2018, Tesoro agreed to settle the earn-out dispute and release and discharge any related claims in exchange for our payment of $ 10.5 million.

United Steelworkers Union Dispute

A portion of our employees at the Par East refinery are represented by the United Steelworkers Union (“USW”).

On March 23, 2015, the union ratified a four-year extension of the collective bargaining agreement.

On January 13, 2016, the USW filed a claim against PHR before the United States National Labor Relations Board (the “NLRB”) alleging a refusal to bargain collectively and in good faith.

On March 29, 2016, the NLRB deferred final determination on the USW charge to the grievance/arbitration process under the extant collective bargaining agreement.

Arbitration was commenced and concluded on October 1, 2018, with the arbitrator taking the matter under advisement thereafter.

In a decision dated November 27, 2018, the arbitrator denied the grievance without prejudice to USW’s NLRB claim regarding retiree medical and short term disability benefits.

On June 5, 2019, the NLRB approved the withdrawal of USW’s claim against PHR.

Environmental Matters

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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.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

The Par East refinery, our Wyoming refinery, and our Washington refinery, acquired in January 2019, were all granted small refinery status by the U.S.

Environmental Protection Agency (“EPA”) for 2018.

Owing to the receipt of these small refinery exemptions, our net income for the year ended December 31, 2019 includes $ 5.3 million of net RINs benefit .

Wyoming Refinery

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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.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

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 $ 300,000 .

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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.

The DOH’s GHG regulation allows, and the Hawaii refineries submitted, a GHG reduction plan which includes an assessment of alternatives which demonstrates that additional reductions are not cost-effective or necessary because the State of Hawaii has already reached the 1990 levels according to a report prepared by the DOH in January 2019.

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 of 2007 (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.

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

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

miles per gallon by model year 2025.

In August 2012, the EPA and National Highway Traffic Safety Administration (“NHTSA”) jointly adopted regulations that establish vehicle carbon dioxide emissions standards and 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.

The agencies have not yet issued a final rule.

Although the revised fuel economy standards are expected to be less stringent than the initial standards for model years 2021-2025, it is uncertain whether the revised standards will increase year over year.

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.

Over time, higher annual RFS requirements have the potential to reduce demand for our refined transportation fuel products.

In the near term, the RFS will be satisfied primarily with fuel ethanol blended into gasoline.

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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.

EPA has not yet set volumetric requirements for 2021, which makes it difficult to estimate our obligations.

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.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

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.

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The standard also lowers the allowable benzene, aromatics, and olefins content of gasoline.

The effective date for the new standard is January 1, 2017, however, approved small volume refineries had until January 1, 2020 to meet the standard.

The Par East 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.

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 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.

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.

Owing to the receipt of these small refinery exemptions, our net income for the year ended December 31, 2019 includes $ 5.3 million of net RINs benefit.

All 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) was lowered from 10,000 ppm (1%) to 1,000 ppm (0.1%).

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.

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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, 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.

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, 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 a consent decree.

Indemnification

In addition to its obligation to reimburse us for capital expenditures incurred pursuant to a 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 a 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

PAR PACIFIC HOLDINGS, INC.

2 unchanged sentences

For the Years Ended December 31, 2020, 2019, and 2018

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 refinery.

As a result of the Consent Decree, PHR expanded its previously-announced 2016 Par East 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.

Through December 31, 2019 , Tesoro has reimbursed us for $ 12.2 million of our total capital expenditures incurred in connection with the Consent Decree.

As of December 31, 2019 , all reimbursable capital expenditures incurred pursuant to the Consent Decree were collected.

Net capital expenditures and reimbursements related to the Consent Decree for the years ended December 31, 2019 , 2018 , and 2017 are presented within Capital expenditures on our consolidated statement of cash flows for the related periods.

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.

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

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Government and Noble Energy, Inc.

As of December 31, 2019 , two related claims totaling approximately $ 22.4 million remained to be resolved by the trustee for the General Trust 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.

As of December 31, 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.

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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.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

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.

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Major Customers

For the year ended December 31, 2017 , we had one customer in our refining segment that accounted for 10 % of our consolidated revenues.

We sell a variety of refined products to a diverse customer base.

For the year ended December 31, 2020, we had one customer in our refining segment that accounted for 13 % of our consolidated revenue.

No other customer accounted for more than 10% of our consolidated revenues during the years ended December 31, 2020, 2019, and 2018.

Note 18— Stockholders’ Equity

Our certificate of incorporation contains restrictions on the transfer of certain of our securities in order to preserve the net operating loss carryovers, capital loss carryovers, general business credit carryovers, alternative minimum tax credit carryovers, and foreign tax credit carryovers, as well as any “net unrealized built-in loss” within the meaning of Section 382 of the Internal Revenue Service Code, of us or any direct or indirect subsidiary thereof.

Our certificate of incorporation contains restrictions on the transfer of certain of our securities in order to preserve the net operating loss carryovers, capital loss carryovers, general business credit carryovers, and foreign tax credit carryovers, as well as any “net unrealized built-in loss” within the meaning of Section 382 of the Internal Revenue Service Code, of us or any direct or indirect subsidiary thereof.

These restrictions include provisions regarding approval by our Board of Directors of transfers of common stock by holders of five percent or more of the outstanding common stock.

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The Registration Rights Agreement states that at any time after the consummation of a qualified public offering, any Stockholder or group of Stockholders that, together with its or their affiliates, holds more than fifteen percent of the Registrable Shares (as defined in the Registration Rights Agreement), will have the right to require us to file with the SEC a registration statement for a public offering of all or part of its Registrable Shares (each a “Demand Registration”), by delivery of written notice to the company (each, a “Demand Request”).

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

Within 90 days after receiving the Demand Request, we must file with the SEC the registration statement with respect to the Demand Registration, subject to certain limitations as set forth in the Registration Rights Agreement.

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The registration rights granted in each rights agreement are subject to customary indemnification and contribution provisions, as well as customary restrictions such as suspension periods and, if a registration is for an underwritten offering, limitations on the number of shares to be included in the underwritten offering imposed by the managing underwriter.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

In connection with the completion of the Company’s private unregistered offering of its 5.00% Convertible Senior Notes, the Company entered into a Registration Rights Agreement (the “Convertible Notes Registration Rights Agreement”), dated as of June 21, 2016, with the initial purchasers in the offering of the 5.00% Convertible Senior Notes.

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On December 20, 2012, our Board of Directors (“Board”) approved the Par Petroleum Corporation 2012 Long Term Incentive Plan (“Incentive Plan” or “LTIP”).

Under the Incentive Plan, the Board, or a committee of the Board, may grant incentive stock options, nonstatutory stock options, restricted stock, and restricted stock units to directors and other employees or those of our subsidiaries.

On February 16, 2016 and February 27, 2018 , the Board approved the amendment and restatement of the Incentive Plan to increase the number of shares issuable under the Amended and Restated LTIP.

Under the Incentive Plan, the Board, or a committee of the Board, may grant incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, and performance restricted stock units to directors and other employees or those of our subsidiaries.

On February 16, 2016 and February 27, 2018, the Board

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

approved the amendment and restatement of the Incentive Plan to increase the number of shares issuable under the Amended and Restated LTIP.

The Company’s shareholders ratified the amended and restated Incentive Plan on June 2, 2016 and May 8, 2018, respectively.

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Restricted stock awards generally vest ratably over a four-year period.

Restricted stock units do not vest ratably, rather they vest in full at the end of three years .

Restricted stock units do not vest ratably, rather they generally vest in full at the end of three years , while some restricted stock units vest over the same period of time with a one-year cliff.

Stock options are issued with an exercise price equal to the fair market value of our common stock on the date of grant and are subject to such other terms and conditions as may be determined by the Board.

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The sale or transfer of the SPP Shares by such participant would be limited for the earlier of (i) two years from the date of purchase or (ii) the termination of the participant’s service with us or any affiliates for any reason.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

restricted common stock vesting on each of the two annual anniversaries of the date of grant.

Additionally, the SPP provides that each purchasing participant will be granted a number of shares of restricted common stock under the Incentive Plan equal to 20 % of the SPP Shares purchased with 50 % of the restricted common stock vesting on each of the two annual anniversaries of the date of grant.

Each purchasing participant will also be granted nonstatutory stock options with a 5-year term to purchase a number of shares of common stock under the Incentive Plan (with an exercise price equal to the Fair Market Value as defined in the Incentive Plan on the date of grant) equal to certain specified percentages of the SPP Shares purchased based on a Black-Scholes model with 50 % of the options vesting on each of the two annual anniversaries of the date of grant.

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Years Ended December 31,

2020 2019 2018

Restricted Stock Awards $ 3,939 $ 3,490 $ 3,483

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At December 31, 2020, 287 thousand shares remained available under the ESPP.

During the year ended December 31, 2019 , we recognized $ 0.2 million of compensation costs in General and administrative expense (excluding depreciation) and Operating expense (excluding depreciation) related to the 15 % discount offered to employees under the ESPP.

As of December 31, 2019 , employees purchased 68 thousand shares under the ESPP.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

During each of the years ended December 31, 2020 and 2019, we recognized $ 0.2 million of compensation costs in General and administrative expense (excluding depreciation) and Operating expense (excluding depreciation) related to the 15 % discount offered to employees under the ESPP.

During the years ended December 31, 2020 and 2019, employees purchased 145 thousand and 68 thousand shares under the ESPP, respectively.

Management Stock Purchase Plan

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The following table summarizes our restricted stock activity (in thousands, except per share amounts):

Shares Weighted-

Grant Date Fair

Unvested balance at December 31, 2019 538 $ 16.95

Granted 337 16.97

Vested ( 225 ) 16.83

Forfeited ( 21 ) 18.53

Unvested balance at December 31, 2020 629 $ 16.89

The total fair value of restricted stock and restricted stock units that vested during the years ended December 31, 2020, 2019, and 2018 was $ 3.8 million, $ 3.7 million, and $ 3.3 million, respectively.

The estimated weighted-average grant-date fair

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

value per share of restricted stock and restricted stock units granted during the years ended December 31, 2019 , 2018 , and 2017 was $ 17.43 , $ 17.47 , and $ 15.49 , respectively.

The estimated weighted-average grant-date fair value per share of restricted stock and restricted stock units granted during the years ended December 31, 2020, 2019, and 2018 was $ 16.97 , $ 17.43 , and $ 17.47 , respectively.

As of December 31, 2020 and 2019, there was approximately $ 7.1 million and $ 6.3 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 1.68 years and 1.69 years, respectively.

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The following table summarizes our performance restricted stock activity (in thousands, except per unit amounts):

Units Weighted-

Grant Date Fair

Unvested balance at December 31, 2019 146 $ 16.33

Granted 47 19.73

Vested ( 54 ) 14.60

Forfeited — —

Unvested balance at December 31, 2020 139 $ 18.02

These performance restricted stock units had a fair value of approximately $ 0.8 million , $ 0.8 million , and $ 0.7 million , respectively, and are subject to certain annual performance targets based on three-year-performance periods as defined by our Board of Directors.

The granted performance restricted stock units had a fair value of approximately $ 0.9 million, $ 0.8 million, and $ 0.8 million during the years ended December 31, 2020, 2019, and 2018, respectively, and are subject to certain annual performance targets based on three-year performance periods as defined by our Board.

The estimated weighted-average grant-date fair value per share of performance restricted stock units granted during the years ended December 31, 2020, 2019, and 2018 was $ 19.73 , $ 17.00 , and $ 17.34 , respectively.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

As of December 31, 2020 and 2019, there were approximately $ 1.0 million and $ 0.9 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 1.75 years and 1.74 years, respectively.

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The weighted-average assumptions used to measure stock options granted during 2020, 2019, and 2018 are presented below.

2020 2019 2018

Expected life from date of grant (years) 5.3 5.3 5.3

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Risk-free interest rate 1.31 % 2.46 % 2.50 %

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

The following table summarizes our stock option activity (in thousands, except per share amounts and term years):

Number of Options

Weighted-Average

Term in Years

Number of Options Weighted-Average

Price Weighted-Average

Term in Years Aggregate

Outstanding balance at December 31, 2019 2,030 $ 19.31 4.7 $ 7,981

Issued 279 19.73

Exercised — —

Forfeited / canceled ( 181 ) 20.56

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The estimated weighted-average grant-date fair value per share of options granted during the year ended December 31, 2020, 2019, and 2018 was $ 6.30 , $ 5.98 , and $ 6.30 , respectively.

As of December 31, 2019 and 2018 , there were approximately $ 2.7 million and $ 3.4 million , respectively, of total unrecognized compensation costs related to stock option awards, that are expected to be recognized on a straight-line basis over a weighted-average period of 1.69 and 2.32 years, respectively.

As of December 31, 2020 and 2019, there were approximately $ 2.8 million and $ 2.7 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 1.68 years and 1.69 years, respectively.

Note 19— Benefit Plans

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We maintain defined contribution plans for our employees.

All eligible employees, other than our U.S.

Oil employees, may participate in our Par plan after thirty days of service.

All eligible employees at U.S.

All eligible employees, including our U.S.

Oil & Refining Co.

may participate in our U.S.

Oil plan following the later of date of hire or age twenty-one .

For all employees participating in the Par plan and non-union employees participating in the U.S.

Oil plan, we match employee contributions up to a maximum of 6 % of the employee’s eligible compensation, with the employer contributions vesting at 100 % .

employees beginning January 1, 2020, may participate in our Par plan after thirty days of service.

For all employees participating in the Par plan, excluding participating U.S.

Oil union employees, we match employee contributions up to a maximum of 6 % of the employee’s eligible compensation, with the employer contributions vesting at 100 %.

Beginning in January 2021 and as part of cost reductions in response to the impact of the COVID-19 pandemic on our businesses, we have temporarily suspended matching employee contributions for salaried employees with 2020 annual earnings in excess of the IRS highly compensated limit of $ 130,000 .

For the years ended December 31, 2020, 2019, and 2018, we made contributions to the plans totaling approximately $ 5.6 million, $ 5.6 million, and $ 4.0 million, respectively.

Defined Benefit Plans

We maintain defined benefit pension plans (the “Benefit Plans”) covering substantially all our Wyoming Refining employees and the employees of U.S.

We maintain defined benefit pension plans (the “Benefit Plans”) covering eligible Wyoming Refining employees and the employees of U.S.

Oil covered by a collective bargaining agreement.

Benefits under our Wyoming Refining plan are based on years of service and the employee’s highest average compensation received during five consecutive years of the last ten years of employment.

Benefits under our U.S.

Oil plan are based on the employee’s hourly rate of compensation at the beginning of each year of employment.

Our funding policy is to contribute annually an amount equal to the pension expense, subject to the minimum funding requirements of the Employee Retirement Income Security Act of 1974 and the tax deductibility of such contributions.

In December 2016, the Wyoming Refining Plan was amended (the “Plan Amendment”) to freeze all future benefit accruals for salaried plan participants.

Benefits under our Wyoming Refining plan are based on years of service and the employee’s highest average compensation received during five consecutive years of the last ten

PAR PACIFIC HOLDINGS, INC.

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For the Years Ended December 31, 2020, 2019, and 2018

years of employment.

Benefits under our U.S.

Oil plan are based on the employee’s hourly rate of compensation at the beginning of each year of employment.

In December 2016 and March 2021, the Wyoming Refining plan was amended to freeze all future benefit accruals for salaried and hourly plan participants, respectively.

The changes in the projected benefit obligation and the fair value of plan assets of our Benefit Plans for the years ended December 31, 2020 and 2019 were as follows (in thousands):

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Interest cost

Actuarial (gain) loss

Actuarial loss (1) 7,038 6,688

Benefits paid

( 1,690 ) ( 1,620 )

Projected benefit obligation as of the end of the period $ 60,479 $ 52,142

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Benefits paid

( 1,690 ) ( 1,620 )

Fair value of plan assets as of the end of the period $ 46,161 $ 42,866

The underfunded status of our Benefit Plans is recorded within Other liabilities in our consolidated balance sheets.

____________________________________________________

(1) For the year ended December 31, 2020, the change in the actuarial loss was due to a decrease in the discount rate, new entrants to the plan, and salary changes, partially offset by demographic assumption changes.

For the year ended December 31, 2019, the change in the actuarial loss was due to a decrease in the discount rate, partially offset by differences between actual activity and actuarial assumptions and demographic assumption changes.

The underfunded status of our Benefit Plans is recorded within Other liabilities on our consolidated balance sheets.

The reconciliation of the underfunded status of our Benefit Plans of December 31, 2020 and 2019 was as follows:

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Underfunded status $ 14,318 $ 9,276

Gross amounts recognized in accumulated other comprehensive income:

Gross amounts recognized in accumulated other comprehensive income (loss):

Net actuarial gain (loss) $ ( 6,946 ) $ ( 2,622 )

____________________________________________________

As of December 31, 2019 , we had an immaterial amount of service costs recognized in accumulated other comprehensive income.

As of December 31, 2019 , we had $ 0.2 million in accumulated other comprehensive income that is expected to be amortized into net periodic benefit cost in 2020 .

(1) As of December 31, 2020, we had no service costs recognized in accumulated other comprehensive income.

PAR PACIFIC HOLDINGS, INC.

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Weighted-average assumptions used to measure our projected benefit obligation as of December 31, 2020, 2019, and 2018 and net periodic benefit costs for the years ended December 31, 2020, 2019 and 2018 are as follows:

2020 2019 2018

Projected benefit obligation:

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_________________________________________________________

In determining the discount rate, we use yields on high-quality fixed income investments with payments matched to the estimated distributions of benefits from our plans.

The expected long-term rate of return is based on a blend of historic returns of equity and debt securities.

(1) In determining the discount rate, we use pricing and yield information for high-quality corporate bonds that result in payments similar to the estimated distributions of benefits from our plans.

(2) The expected long-term rate of return is based on the target asset allocation of each plan and capital market assumptions developed using forward-looking models and historical market data and trends.

The net periodic benefit cost for the years ended December 31, 2020, 2019, and 2018 includes the following components:

2020 2019 2018

Components of net periodic benefit cost:

Service cost $ 1,347 $ 910 $ 548

Interest cost 1,642 1,794 1,107

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Net periodic benefit cost $ 843 $ 830 $ 397

The Service cost component of net periodic benefit cost is included in Operating expense (excluding depreciation) in our consolidated statement of operations for the years ended December 31, 2019 , 2018 , and 2017 .

The other components of net periodic benefit cost are included in Other income (expense), net in our consolidated statement of operations for the years ended December 31, 2019 , 2018 , and 2017 .

The weighted-average asset allocation for our Wyoming Refining plan at December 31, 2019 is as follows:

Asset category:

Equity securities

Debt securities

The Service cost component of net periodic benefit cost is included in Operating expense (excluding depreciation) on our consolidated statement of operations for the years ended December 31, 2020, 2019, and 2018.

The other components of net periodic benefit cost are included in Other income, net on our consolidated statement of operations for the years ended December 31, 2020, 2019, and 2018.

PAR PACIFIC HOLDINGS, INC.

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For the Years Ended December 31, 2020, 2019, and 2018

The weighted-average asset allocation for our Wyoming Refining plan at December 31, 2020 is as follows:

Target Actual

Asset category:

Equity securities 54 % 54 %

Debt securities 35 % 35 %

Real estate 11 % 11 %

Total 100 % 100 %

The weighted-average asset allocation for our U.S.

Oil plan at December 31, 2020 is as follows:

Target Actual

Asset category:

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Cash and Cash Equivalents 1 % — %

Total 100 % 100 %

We have a long-term, risk-controlled investment approach using diversified investment options with minimal exposure to volatile investment options like derivatives.

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The pooled separate accounts are valued based upon the fair market value of the underlying investments and are deemed to be Level 2.

We intend to contribute $ 0.5 million to the U.S.

We intend to contribute $ 0.2 million to the Wyoming Refining plan during 2021.

We do no t intend to make any contributions to the U.S.

Oil plan during 2021.

We do no t intend to make any contributions to the Wyoming Refining plan during 2020 .

Based on current data and assumptions, the following benefit payments, which reflect expected future service, as appropriate, are expected to be paid over the next 10 years:

Thereafter 13,806

Note 20— 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 61 thousand shares during the year ended December 31, 2020 and 354 thousand shares during each of the years ended December 31, 2019 and 2018.

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.

PAR PACIFIC HOLDINGS, INC.

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For the Years Ended December 31, 2020, 2019, and 2018

Note 19— 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 354 thousand shares for each of the years ended December 31, 2019 , 2018 , and 2017 .

The common stock warrants are included in the calculation of basic income (loss) per share because they are issuable for minimal consideration.

The following table sets forth the computation of basic and diluted income per share (in thousands, except per share amounts):

The following table sets forth the computation of basic and diluted income (loss) per share (in thousands, except per share amounts):

Year Ended December 31,

2020 2019 2018

Net income (loss) $ ( 409,086 ) $ 40,809 $ 39,427

Undistributed income allocated to participating securities (1) — 438 556

Net income attributable to common stockholders

Net income (loss) attributable to common stockholders ( 409,086 ) 40,371 38,871

Net income effect of convertible securities — — —

Numerator for diluted income per common share

Numerator for diluted income (loss) per common share $ ( 409,086 ) $ 40,371 $ 38,871

Basic weighted-average common stock shares outstanding 53,295 50,352 45,726

1 unchanged sentence

Diluted weighted-average common stock shares outstanding 53,295 50,470 45,755

Basic income per common share

Diluted income per common share

Basic income (loss) per common share $ ( 7.68 ) $ 0.80 $ 0.85

Diluted income (loss) per common share $ ( 7.68 ) $ 0.80 $ 0.85

Diluted income (loss) per common share excludes the following equity instruments because their effect would be anti-dilutive:

Shares of unvested restricted stock 475 182 68

Shares of stock options 2,229 1,577 1,304

Common stock equivalents using the if-converted method of settling the 5.00% Convertible Senior Notes

2,704 5,122 6,389

Participating securities includes restricted stock that has been issued but has not yet vested.

For the year ended December 31, 2019 , our calculation of diluted shares outstanding excluded 182 thousand shares of unvested restricted stock and 1.6 million stock options.

For the year ended December 31, 2018 , our calculation of diluted shares outstanding excluded 68 thousand shares of unvested restricted stock and 1.3 million stock options.

For the year ended December 31, 2017 , our calculation of diluted shares outstanding excluded 65 thousand shares of unvested restricted stock and 1.3 million stock options.

As discussed in Note 12—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 years ended December 31, 2019 , 2018 , and 2017 , diluted income per share was determined using the if-converted method.

Our calculation of diluted shares outstanding for years ended December 31, 2019 , 2018 , and 2017 excluded 5.1 million , 6.4 million , and 6.4 million common stock equivalents, respectively, as the effect would be anti-dilutive.

________________________________________________________

(1) Participating securities include restricted stock that has been issued but had not yet vested.

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 year ended December 31, 2020.

Note 21— Income Taxes

3 unchanged sentences

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.

For the year ended December 31, 2020, we recorded an income tax benefit of $ 20.7 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 year ended December 31, 2019, we recorded an income tax benefit of $ 69.7 million primarily driven by a $ 64.2 million benefit associated with the partial release of our valuation allowance in connection with the recognition of deferred tax liabilities acquired as part of the Washington Acquisition.

2 unchanged sentences

Section 382 generally places a limit on the amount of NOL carryforwards and other tax attributes arising before an ownership change that may be used to offset taxable income after an ownership change.

We believe that we have qualified for an exception to the general limitation rules under Code Section 382(l)(5) which provides for substantially less restrictive

We believe that we have qualified for an exception to the general limitation rules under Code Section 382(l)(5) which provides for substantially less restrictive limitations on our NOL carryforwards.

Our amended and restated certificate of incorporation places restrictions upon the ability of certain equity interest holders to transfer their ownership interest in us.

These restrictions are designed to provide us with the maximum assurance that another ownership change does not occur that could adversely impact our NOL carryforwards.

PAR PACIFIC HOLDINGS, INC.

2 unchanged sentences

For the Years Ended December 31, 2020, 2019, and 2018

limitations on our NOL carryforwards.

Our amended and restated certificate of incorporation places restrictions upon the ability of certain equity interest holders to transfer their ownership interest in us.

These restrictions are designed to provide us with the maximum assurance that another ownership change does not occur that could adversely impact our NOL carryforwards.

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 December 31, 2020.

1 unchanged sentence

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.

The states from which our refining, logistics, and retail 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, logistics, and retail operations.

The Tax Cuts and Jobs Act enacted in 2017 lowered the Federal corporate tax rate from 35% to 21% and made numerous other tax law changes.

1 unchanged sentence

During 2018, we recorded a benefit for the release of $ 0.7 million of our valuation allowance to offset future temporary differences associated with the interest expense carryforwards available under the Tax Cuts and Jobs Act.

During 2017, as a result of the change in rate, we remeasured our net deferred tax assets and the associated valuation allowance by $ 207.7 million .

In 2017, we also released $ 0.8 million of valuation allowance related to Alternative Minimum Tax (“AMT”) credit carried forward from prior years that became refundable in connection with the Tax Cuts and Jobs Act.

We will continue to assess the realizability of our deferred tax assets based on consideration of actual operating results.

2 unchanged sentences

Year Ended December 31,

2020 2019 2018

U.S.—Federal $ — $ ( 3,203 ) $ ( 328 )

U.S.—State 51 400 —

Foreign 125 — —

U.S.—Federal ( 20,509 ) ( 58,461 ) 426

U.S.—State ( 387 ) ( 8,425 ) 235

Total $ ( 20,720 ) $ ( 69,689 ) $ 333

Income tax expense was different from the amounts computed by applying U.S.

1 unchanged sentence

Year Ended December 31,

2020 2019 2018

Federal statutory rate 21.0 % 21.0 % 21.0 %

1 unchanged sentence

Change in valuation allowance related to current activity ( 14.0 ) % 227.1 % ( 21.3 ) %

Change in valuation allowance related to change in tax rate

Change in tax rate

Permanent items ( 2.3 ) % ( 4.3 ) % 1.3 %

8 unchanged sentences

Net operating loss $ 427,245 $ 373,717

Property, plant, and equipment

Intangible assets 2,958 —

Environmental credit obligations 25,994 771

Other 22,551 18,789

Total deferred tax assets 478,748 393,277

2 unchanged sentences

Deferred tax liabilities:

Inventory 10,328 5,738

Property and equipment 58,122 64,281

2 unchanged sentences

Intangible assets — 750

Other — 4,904

Total deferred tax liabilities 72,972 89,567

2 unchanged sentences

If not utilized, the NOL carryforwards will expire during 2028 through 2036.

We also have AMT Credit Carryovers of $ 0.8 million which are refundable under the U.S.

tax reform legislation effective in tax year 2019.

PAR PACIFIC HOLDINGS, INC.

4 unchanged sentences

We report the results for the following four reportable segments:

(i) Refining , (ii) Retail , (iii) Logistics , and (iv) Corporate and Other.

(i) Refining, (ii) Logistics, (iii) Retail, and (iv) Corporate and Other.

Commencing in the first quarter of 2018, the results of operations of Northwest Retail are included in our retail segment.

1 unchanged sentence

Summarized financial information concerning reportable segments consists of the following (in thousands):

For the year ended December 31, 2019

Corporate, Eliminations, and Other (1)

For the year ended December 31, 2020 Refining Logistics Retail Corporate, Eliminations, and Other (1) Total

Revenues $ 2,886,701 $ 180,909 $ 363,713 $ ( 306,453 ) $ 3,124,870

Cost of revenues (excluding depreciation) 2,908,870 110,385 234,885 ( 306,443 ) 2,947,697

1 unchanged sentence

Depreciation, depletion, and amortization 53,930 21,899 10,692 3,515 90,036

Impairment expense 55,989 — 29,817 — 85,806

General and administrative expense (excluding depreciation) — — — 41,288 41,288

8 unchanged sentences

Income tax benefit 20,720

Net loss $ ( 409,086 )

Total assets $ 1,478,603 $ 444,800 $ 193,365 $ 17,093 $ 2,133,861

Goodwill 39,821 55,232 32,944 — 127,997

Capital expenditures 38,781 20,898 2,547 1,296 63,522

5 unchanged sentences

For the Years Ended December 31, 2020, 2019, and 2018

For the year ended December 31, 2018

Corporate, Eliminations, and Other (1)

For the year ended December 31, 2019 Refining Logistics Retail Corporate, Eliminations, and Other (1) Total

Revenues $ 5,167,942 $ 199,226 $ 458,889 $ ( 424,541 ) $ 5,401,516

Cost of revenues (excluding depreciation) 4,783,747 112,124 332,302 ( 424,584 ) 4,803,589

9 unchanged sentences

Change in value of contingent consideration —

Equity earnings from Laramie Energy, LLC

Income before income taxes

Income tax expense

Equity losses from Laramie Energy, LLC ( 89,751 )

Loss before income taxes ( 28,880 )

Income tax benefit 69,689

Net income $ 40,809

Total assets $ 1,907,318 $ 494,209 $ 232,150 $ 66,883 $ 2,700,560

Goodwill 77,927 55,232 62,760 — 195,919

Capital expenditures 34,492 40,730 6,869 1,829 83,920

1 unchanged sentence

(1) Includes eliminations of intersegment revenues and cost of revenues of $ 424.5 million for the year ended December 31, 2019.

For the year ended December 31, 2017

Corporate, Eliminations, and Other (1)

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

For the year ended December 31, 2018 Refining Logistics Retail Corporate, Eliminations, and Other (1) Total

Revenues $ 3,210,067 $ 125,743 $ 441,040 $ ( 366,122 ) $ 3,410,728

Cost of revenues (excluding depreciation) 2,957,995 77,712 333,664 ( 366,255 ) 3,003,116

8 unchanged sentences

Change in value of common stock warrants 1,801

Change in value of contingent consideration ( 10,500 )

Equity earnings from Laramie Energy, LLC 9,464

Income before income taxes 39,760

Income tax benefit

Income tax expense ( 333 )

Net income $ 39,427

Total assets $ 968,623 $ 130,138 $ 201,848 $ 160,125 $ 1,460,734

Goodwill 53,264 37,373 62,760 — 153,397

Capital expenditures 25,601 13,055 6,101 3,682 48,439

1 unchanged sentence

(1) Includes eliminations of intersegment revenues and cost of revenues of $ 365.5 million for the year ended December 31, 2018.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

Note 23— Related Party Transactions

Certain of our stockholders, or affiliates of our stockholders, were the lenders under our Term Loan.

In previous years, they received common stock warrants exercisable for shares of common stock in connection with the origination of the Term Loan.

On June 15, 2016 , the Term Loan was amended to permit (i) the issuance of the 5.00% Convertible Senior Notes , (ii) the issuance of the Bridge Notes, and (iii) the WRC Acquisition .

We paid a consent fee of $ 2.5 million in connection with this amendment, $ 1.3 million of which was paid to an affiliate of Whitebox, previously one of our largest stockholders.

On June 21, 2016 , we repaid $ 5 million of the Term Loan pursuant to the terms of the amendment, $ 3.3 million of which was allocated to an affiliate of Whitebox.

On June 30, 2017, we fully repaid and terminated the Term Loan.

Convertible Notes Offering

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Please read Note 13—Debt for further discussion.

Prior to the Notes Offering, we also entered into a backstop convertible note commitment letter with funds managed by Highbridge Capital Management, LLC (“Highbridge”) and funds managed on behalf of Whitebox (collectively, the “Backstop Convertible Note Purchasers”), pursuant to which the Backstop Convertible Note Purchasers committed to purchase $ 100 million aggregate principal amount of senior unsecured convertible notes due 2021, which would be issued in a private offering pursuant to an exemption from the registration requirements of the Securities Act.

Prior to the Notes Offering, we also entered into a backstop convertible note commitment letter with funds managed by Highbridge Capital Management, LLC (“Highbridge”) and funds managed on behalf of Whitebox Advisors, LLC (“Whitebox”) (collectively, the “Backstop Convertible Note Purchasers”), pursuant to which the Backstop Convertible Note Purchasers committed to purchase $ 100 million aggregate principal amount of senior unsecured convertible notes due 2021, which would be issued in a private offering pursuant to an exemption from the registration requirements of the Securities Act.

The obligations of the Backstop Convertible Note Purchasers to purchase convertible notes automatically terminated upon the consummation of the Notes Offering, provided that each of the Back Up Convertible Note Purchasers and their respective affiliates were allocated the opportunity to purchase at least $ 32.5 million of the 5.00% Convertible Senior Notes offered in the Notes Offering.

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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.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019, and 2018

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.

2 unchanged sentences

There were no costs incurred related to this agreement during the years ended December 31, 2020, 2019, or 2018.

Note 24— Subsequent Events

Washington Refinery Intermediation Agreement

On February 11, 2021, we and MLC amended the Washington Refinery Intermediation Agreement and extended the term expiry date from June 30, 2021 to March 31, 2022.

This amendment also revised certain other terms and conditions, including a revision to the interest rate of MLC receivable advances to be based on another industry standard benchmark rate that will be effective upon LIBOR’s scheduled retirement at the end of 2021.

The terms of the new agreement were not materially different from the prior agreement.

Sale-Leaseback Transaction

On February 11, 2021, PHL and Par Property LLC (collectively, the “Sellers”), both our wholly owned subsidiaries, entered into a Purchase Agreement and Escrow Instructions (the “Purchase Agreement”) with MDC Coast HI 1, LLC, a subsidiary of Realty Income Corporation (the “Buyer”), and Fidelity National Title Insurance Company (the “Escrow Agent”), pursuant to which the Sellers and Buyer agreed to consummate a sale-leaseback transaction (the “Sale-Leaseback Transaction”).

Under the terms of the Purchase Agreement, the Sellers agreed to sell to the Buyer a total of twenty-two ( 22 ) retail convenience store/fuel station properties located in Hawaii (the “Sale-Leaseback Properties”) for an aggregate cash purchase price of $ 116.1 million.

On February 23, 2021, the Sellers and Buyer closed the Sale-Leaseback Transaction with respect to twenty-one ( 21 ) Sale-Leaseback Properties for an aggregate cash purchase price of approximately $ 109.4 million.

We anticipate that during the first quarter there will be a separate closing for one additional property, as provided under the Purchase Agreement.

We used approximately $ 51.7 million of the net cash proceeds to repay the Retail Property Term Loan and related interest rate swap and the PHL Term Loan which were related to certain of the Sale-Leaseback Properties.

We expect to use the remaining net cash proceeds of $ 54.1 million for general corporate purposes.

Upon the closing of the sale of the Sale-Leaseback Properties, PHL entered into a Master Land and Building Lease Agreement (the “Lease Agreement”) with the Buyer, pursuant to which, among other things, PHL leased the Sale-Leaseback Properties from the Buyer, on a commercial triple-net basis, for 15 years, unless earlier terminated.

The initial lease term may be extended for up to four five -year renewal terms in accordance with the terms of the Lease Agreement.

Under the terms of the Lease Agreement, PHL is responsible for monthly rent and all expenses related to the leased facilities, including, but not limited to, insurance premiums, taxes, and other expenses, such as utilities.

In connection with PHL’s entry into the Lease Agreement, Par Petroleum, LLC, our wholly owned subsidiary, entered into a guaranty agreement in favor of the Buyer, pursuant to which, among other things, Par Petroleum, LLC guaranteed the payment when due of the monthly rent, and all other additional rent, interest, and charges payable by PHL to the Buyer under the Lease Agreement, and the performance by PHL of all the material terms, conditions, covenants, and agreements of the Lease Agreement.

PAR PACIFIC HOLDINGS, INC.

5 unchanged sentences

Year Ended December 31, 2020

Operating income

Net income (loss)

Net income (loss) per share

Revenues $ 1,204,083 $ 515,301 $ 689,981 $ 715,505

Operating income (loss) ( 181,173 ) ( 25,443 ) 2,750 ( 114,132 )

Net loss ( 222,337 ) ( 40,560 ) ( 14,271 ) ( 131,918 )

Net loss per share

Basic $ ( 4.18 ) $ ( 0.76 ) $ ( 0.27 ) $ ( 2.47 )

Diluted $ ( 4.18 ) $ ( 0.76 ) $ ( 0.27 ) $ ( 2.47 )

Year Ended December 31, 2019

Revenues $ 1,191,335 $ 1,409,409 $ 1,401,638 $ 1,399,134

Operating income 21,423 48,621 18,405 59,531

1 unchanged sentence

Net income (loss) per share

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

Note 24— Supplemental Oil and Gas Disclosures (Unaudited)

Our share of Laramie Energy's capitalized costs related to oil and gas activities are as follows (in thousands):

Company’s share of Laramie Energy

Unproved properties

Proved properties

Accumulated depreciation, depletion, and amortization

Our share of Laramie Energy's costs incurred in oil and gas activities including costs associated with assets retirement obligations, are as follows (in thousands):

Year Ended December 31,

Company’s share of Laramie Energy

Acquisition costs

Development costs—other

For the years ended December 31, 2019 , 2018 , and 2017 , neither we nor Laramie Energy incurred exploratory well costs so no amounts were capitalized or expensed during these respective periods.

Accordingly, there were no suspended exploratory well costs at December 31, 2019 , 2018 , and 2017 that were being evaluated.

As of December 31, 2019 and 2018, we had no significant capitalized costs related to our other non-operated natural gas and oil interests.

For the years ended December 31, 2019 and 2018, we incurred no significant costs related to our other non-operated natural gas and oil interests.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

A summary of the results of operations for oil and gas producing activities, excluding general and administrative costs, is as follows (in thousands):

Year Ended December 31,

Oil and gas revenues

Production costs

Depletion and amortization

Results of operations of oil and gas producing activities

Company’s share of Laramie Energy

Oil and gas revenues

Production costs

Impairment of proved properties (1)

Depletion, depreciation, and amortization

Results of operations of oil and gas producing activities

Total results of operations of oil and gas producing activities

__________________________________________________

Please read Note 3—Investment in Laramie Energy, LLC for further disclosures and information on Laramie Energy's impairment of proved properties.

Oil and Gas Reserve Information

There are numerous uncertainties inherent in estimating quantities of proved crude oil and natural gas reserves.

Crude oil and natural gas reserve engineering is a subjective process of estimating underground accumulations of crude oil and natural gas that cannot be precisely measured.

The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment.

Results of drilling, testing, and production subsequent to the date of the estimate may justify revision of such estimate.

Accordingly, reserve estimates are often different from the quantities of crude oil and natural gas that are ultimately recovered.

Estimates of our crude oil and natural gas reserves and present values as of December 31, 2019 , 2018 , and 2017 , were prepared by Netherland, Sewell & Associates, Inc., independent reserve engineers.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

A summary of changes in estimated quantities of proved reserves for the years ended December 31, 2019 , 2018 , and 2017 is as follows:

Balance at January 1, 2017

Revisions of quantity estimate

Extensions and discoveries

Balance at December 31, 2017

Revisions of quantity estimate

Extensions and discoveries

Balance at December 31, 2018

Revisions of quantity estimate

Extensions and discoveries

Acquisitions and divestitures

Balance at December 31, 2019

Company ’ s share of Laramie Energy

Balance at January 1, 2017

Revisions of quantity estimate

Extensions and discoveries

Acquisitions and divestitures

Balance at December 31, 2017 (2)

Revisions of quantity estimate

Extensions and discoveries

Acquisitions and divestitures

Balance at December 31, 2018 (3)

Revisions of quantity estimate

Extensions and discoveries

Acquisitions and divestitures

Balance at December 31, 2019 (4)

Total at December 31, 2019

__________________________________________________

MMcfe is based on a ratio of 6 Mcf to 1 barrel.

During 2017 , the Company’s estimated proved reserves, inclusive of the Company’s share of Laramie Energy’s estimated proved reserves, decreased by 22,095 MMcfe or approximately 6 % .

Production volumes related to our share of Laramie Energy’s estimated proved reserves resulted in a decrease of 22,178 MMcfe.

The remaining change in estimated proved reserves was due to performance and other changes to the Company’s share of Laramie Energy’s proved developed producing and developed non-producing reserves.

During 2018 , the Company’s estimated proved reserves, inclusive of the Company’s share of Laramie Energy’s estimated proved reserves, increased by 78,682 MMcfe or approximately 23 % .

The Company’s share of Laramie Energy’s revisions of quantity estimate increased primarily due to:

1) additions of 60,679 MMcfe of proved undeveloped reserves primarily located within Laramie Energy’s northern acreage, 2) 11,614 MMcfe of positive revisions associated with 13 probable locations that

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

were converted to proved developed reserves during 2018, and 3) 13,582 MMcfe of positive revisions due to performance improvements and other changes to the Company’s share of Laramie Energy’s proved developed and undeveloped reserves.

Production volumes related to our share of Laramie Energy’s estimated proved reserves resulted in a decrease of 30,421 MMcfe.

During 2018, Laramie Energy closed on a purchase and contribution agreement with an unaffiliated third party that contributed 23,609 MMcfe of proved developed reserves in the Piceance Basin.

During 2019 , the Company’s estimated proved reserves, inclusive of the Company’s share of Laramie Energy’s estimated proved reserves, decreased by 147,267 MMcfe or approximately 35 % .

The decreased was primarily due to:

1) 57,212 MMcfe downward revision driven by the removal of proved undeveloped locations from the development plan due to unfavorable market conditions, and 2) 54,520 MMcfe downward revision due to decreases in average natural gas prices in 2019 compared to 2018.

Production volumes related to our share of Laramie Energy’s estimated proved reserves resulted in a decrease of 35,731 MMcfe.

A summary of proved developed and undeveloped reserves for the years ended December 31, 2019 , 2018 , and 2017 is presented below:

December 31, 2017

Proved developed reserves

Company’s share of Laramie Energy

Proved undeveloped reserves

Company’s share of Laramie Energy

December 31, 2018

Proved developed reserves

Company’s share of Laramie Energy

Proved undeveloped reserves

Company’s share of Laramie Energy

December 31, 2019

Proved developed reserves

Company’s share of Laramie Energy

Proved undeveloped reserves

Company’s share of Laramie Energy

__________________________________________________

MMcfe is based on a ratio of 6 Mcf to 1 barrel.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

Base pricing, before adjustments for contractual

differentials (Company and Laramie Energy):

December 31, 2017

December 31, 2018

December 31, 2019

______________________________________________

Proved reserves are required to be calculated based on the 12-month, first day of the month historical average price in accordance with SEC rules.

The prices shown above are base index prices to which adjustments are made for contractual deducts and other factors.

Future net cash flows presented below are computed using applicable prices (as summarized above) and costs and are net of all overriding royalty revenue interests.

(in thousands)

Future net cash flows

Development and abandonment

Income taxes (1)

Future net cash flows

10% discount factor

Discounted future net cash flows

Company’s share of Laramie Energy

Future net cash flows

Development and abandonment

Income taxes (1)

Future net cash flows

10% discount factor

Discounted future net cash flows

Total discounted future net cash flows

_______________________________________________

No income tax provision is included in the standardized measure of discounted future net cash flows calculation shown above as we do not project to be taxable or pay cash income taxes based on its available tax assets and additional tax assets generated in the development of its reserves because the tax basis of its oil and gas properties and NOL carryforwards exceeds the amount of discounted future net earnings.

PAR PACIFIC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2019, 2018, and 2017

The principal sources of changes in the standardized measure of discounted net cash flows for the years ended December 31, 2019 , 2018 , and 2017 are as follows (in thousands):

Share of Laramie

Balance at January 1, 2017

Sales of oil and gas production during the period, net of production costs

Net change in prices and production costs

Revisions of previous quantity estimates, estimated timing of development and other

Previously estimated development and abandonment costs incurred during the period

Accretion of discount

Balance at December 31, 2017

Sales of oil and gas production during the period, net of production costs

Acquisitions and divestitures

Net change in prices and production costs

Revisions of previous quantity estimates, estimated timing of development and other

Previously estimated development and abandonment costs incurred during the period

Accretion of discount

Balance at December 31, 2018

Sales of oil and gas production during the period, net of production costs

Acquisitions and divestitures

Net change in prices and production costs

Revisions of previous quantity estimates, estimated timing of development and other

Previously estimated development and abandonment costs incurred during the period

Accretion of discount

Balance at December 31, 2019

Basic $ 1.23 $ 0.56 $ ( 1.65 ) $ 0.68

Diluted $ 1.14 $ 0.56 $ ( 1.65 ) $ 0.68

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

3 unchanged sentences

(in thousands, except share data)

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Current assets

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Long-term assets

Operating lease assets

Operating lease right-of-use (“ROU”) assets 3,714 4,276

Investment in subsidiaries 209,010 636,742

Other long-term assets 723 1,128

Total assets $ 346,344 $ 851,053

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Current maturities of long-term debt $ 47,301 $ —

Accounts payable 2,401 2,597

Accrued taxes 49 —

Operating lease liabilities 750 698

16 unchanged sentences

Accumulated deficit ( 477,028 ) ( 67,942 )

Accumulated other comprehensive income

Accumulated other comprehensive income (loss) ( 3,742 ) 582

Total stockholders’ equity 246,274 648,242

7 unchanged sentences

Year Ended December 31,

2020 2019 2018

Operating expenses

7 unchanged sentences

Debt extinguishment and commitment costs — ( 6,091 ) —

Other income, net

Other income (expense), net ( 3 ) 2,303 1,155

Change in value of common stock warrants 4,270 ( 3,199 ) 1,801

1 unchanged sentence

Total other income (expense), net ( 394,912 ) 64,158 74,031

Income before income taxes

Income (loss) before income taxes ( 408,909 ) 41,144 39,100

Income tax benefit (expense) ( 177 ) ( 335 ) 327

Net income (loss) $ ( 409,086 ) $ 40,809 $ 39,427

This statement should be read in conjunction with the notes to consolidated financial statements.

2 unchanged sentences

(PARENT ONLY)

STATEMENTS OF COMPREHENSIVE INCOME

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

Year Ended December 31,

2020 2019 2018

Net income (loss) $ ( 409,086 ) $ 40,809 $ 39,427

Other comprehensive income (loss):

1 unchanged sentence

Total other comprehensive income (loss), net of tax ( 4,324 ) ( 2,091 ) 529

Comprehensive income

Comprehensive income (loss) $ ( 413,410 ) $ 38,718 $ 39,956

____________________________________________________

7 unchanged sentences

Year Ended December 31,

2020 2019 2018

Cash flows from operating activities:

Adjustments to reconcile net income to cash used in operating activities:

Net income (loss) $ ( 409,086 ) $ 40,809 $ 39,427

Adjustments to reconcile net income (loss) to cash used in operating activities:

Depreciation and amortization 2,900 2,969 4,092

6 unchanged sentences

Prepaid and other assets ( 4,253 ) 1,592 ( 2,604 )

Accounts payable, other accrued liabilities, and operating lease assets and liabilities

Accounts payable, other accrued liabilities, and operating lease ROU assets and liabilities ( 187 ) ( 8,441 ) 5,601

Net cash used in operating activities ( 10,839 ) ( 23,841 ) ( 26,106 )

20 unchanged sentences

Net cash received (paid) for:

Interest $ ( 2,475 ) $ ( 5,357 ) $ ( 5,750 )

Taxes ( 28 ) ( 220 ) ( 49 )

Non-cash investing and financing activities:

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Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 10-K has been signed below by the following persons on our behalf and in the capacities indicated and on March 8, 2021.

/s/ WILLIAM PATE

President and Chief Executive Officer

Signature Title

/s/ WILLIAM PATE President and Chief Executive Officer

(Principal Executive Officer)

/s/ WILLIAM MONTELEONE

Chief Financial Officer

/s/ WILLIAM MONTELEONE Chief Financial Officer

(Principal Financial Officer)

William Monteleone

/s/ IVAN GUERRA

Chief Accounting Officer

/s/ IVAN GUERRA Chief Accounting Officer

(Principal Accounting Officer)

/s/ MELVYN N.

Chairman Emeritus

KLEIN Chairman Emeritus

/s/ ROBERT S.

Chairman of the Board of Directors

/s/ TIMOTHY CLOSSEY

SILBERMAN Chairman of the Board of Directors

/s/ TIMOTHY CLOSSEY Director

Timothy Clossey

MELVIN COOPER

MELVIN COOPER Director

Melvin Cooper

/s/ CURTIS ANASTASIO

/s/ CURTIS ANASTASIO Director

Curtis Anastasio

/s/ WALTER A.

/s/ JOSEPH ISRAEL

/s/ JOSEPH ISRAEL Director

Joseph Israel

/s/ KATHERINE HATCHER

/s/ KATHERINE HATCHER Director

Katherine Hatcher

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures