What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-08-05 compared with 2021-05-07 · 364 added, 159 removed, 460 unchanged (53% of the section changed)

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2) Retail - Our retail outlets in Hawaii, Washington, and Idaho sell gasoline, diesel, and retail merchandise through Hele and “76” branded sites, “nomnom” branded company-operated convenience stores, 7-Eleven operated convenience stores, other sites operated by third parties, and unattended cardlock stations.

Through March 31, 2021, we completed the rebranding of all company-operated convenience stores in Washington and Idaho to “nomnom,” our proprietary brand.

3) Logistics - We operate an extensive multi-modal logistics network spanning the Pacific, the Northwest, and the Rockies regions that primarily transports and stores crude oil and refined products for our refineries and transports refined products to our retail sites or third-party purchasers.

As of March 31, 2021, we owned a 46.0% equity investment in Laramie Energy.

We completed the rebranding of all company-operated convenience stores in Washington and Idaho to “nomnom,” our proprietary brand.

3) Logistics - We operate an extensive multi-modal logistics network spanning the Pacific, the Northwest, and the Rocky Mountain regions that primarily transports and stores crude oil and refined products for our refineries and transports refined products to our retail sites or third-party purchasers.

As of June 30, 2021, we owned a 46.0% equity investment in Laramie Energy.

Laramie Energy is focused on producing natural gas in Garfield, Mesa, and Rio Blanco counties, Colorado.

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Recent Events Affecting Comparability of Periods

The spread of COVID-19, in conjunction with related government and other preventative measures taken to mitigate the spread of the virus, has caused severe disruptions in the worldwide economy, including the global demand for crude oil and refined products, the movement of people and goods in the United States, and the global supply chain for industrial and commercial production, all of which have in turn disrupted our businesses and operations.

In December 2020 and February 2021, the U.S.

Food & Drug Administration granted Emergency Use Authorization (“EUA”) for three vaccines to be distributed in the United States.

On April 2, 2021, the Centers for Disease Control and Prevention (“CDC”) announced that individuals who are fully vaccinated can travel domestically at low risk to themselves, though they should still wear masks and adhere to social distancing guidelines and travel is still not recommended.

In addition to measures we took in 2020 in response to the COVID-19 pandemic, as described in our Annual Report on Form 10-K for the year ended December 31, 2020, we have also undertaken additional liquidity-enhancing measures, including deferring or delaying certain capital expenditures related to turnaround activities at our Washington refinery.

We closed sale-leaseback transactions in the first quarter of 2021, in which we sold twenty-two (22) retail convenience store/fuel station properties located in Hawaii (the “Sale-Leaseback Properties”) for a net purchase price of $112.8 million.

We also entered into a lease on the properties for fifteen (15) years, unless earlier terminated, with up to four 5-year renewal options.

On June 10, 2021, the Centers for Disease Control and Prevention (“CDC”) announced that individuals who have been fully vaccinated against COVID-19 can travel domestically at low risk to themselves from COVID-19, though they should still wear masks and adhere to social distancing guidelines.

Beginning July 8, 2021, travelers entering the state of Hawaii who have been fully vaccinated in the U.S.

may bypass quarantine without a pre-travel test.

Tourism in Hawaii increased during the second quarter of 2021, with 419 thousand visitors from the U.S.

West coast in May 2021, an 8% increase compared to the same period in 2019 prior to the pandemic.

With easing COVID-19 restrictions and increasing demand, our profitability in the retail and logistics segments has reached over 90% of pre-pandemic levels.

In the second quarter of 2021, the U.S.

saw continued economic recovery due to increased availability of the COVID-19 vaccine to the public.

As of June 30, 2021, 46% of the United States population has been fully vaccinated.

In Hawaii, Washington, and Wyoming, 52%, 55%, and 34% of the population have been fully vaccinated, respectively.

Though vaccination rates continue to rise, the more contagious Delta variant, now the dominant coronavirus strain in the U.S., could cause a resurgence of COVID-19.

In addition to measures we took in 2020 in response to the COVID-19 pandemic, as described in our Annual Report on Form 10-K as of and for the year ended December 31, 2020, we have also undertaken additional liquidity-enhancing measures, including deferring or delaying certain capital expenditures related to turnaround activities at our Washington refinery.

We also entered into a lease on the properties for fifteen (15) years, unless earlier terminated, with up to four five-year renewal options.

On March 19, 2021, we sold 5.75 million shares of common stock in an underwritten public offering at a public offering price of $16.00 per share resulting in net proceeds to us of approximately $87.2 million, after deducting underwriting discounts and commissions and offering expenses.

We believe the steps we have taken throughout 2020 and more recently in the first quarter of 2021 have strengthened our ability to conduct our operations through current conditions.

We are also utilizing some of the tax payment deferral opportunities and federal refund acceleration opportunities provided by the Internal Revenue Service (“IRS”), Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), and various state-specific provisions.

We believe the steps we have taken throughout 2020 and in the first half of 2021 have strengthened our ability to conduct our operations through current conditions.

We are also utilizing some of the non-income tax payment deferral opportunities at various state levels and utilized federal refund acceleration opportunities provided by the Internal Revenue Service (“IRS”), Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

We continue to maintain existing processes and procedures, including but not limited to processes and procedures around protection of our technology systems and proprietary data, even though a significant number of our employees are working from home.

The health and wellbeing of our employees and customers continue to be our top priorities as we continue navigating the challenges presented by the COVID-19 pandemic.

The financial results contained in this Quarterly Report on Form 10-Q reflect the continuing pandemic-related demand suppression experienced in the first quarter of 2021 in the regions in which we operate.

Though vaccine availability is increasing, the COVID-19 pandemic is ongoing and the impacts of the virus on people and businesses continue to evolve as of the date of this report.

We continue to actively monitor the impact of the global situation on our people, operations, financial condition, liquidity, suppliers, customers, and industry.

Due to the rapid development and fluidity of the situation, the full magnitude of the impact of COVID-19 on our financial condition, future results of operations, and future cash flows and liquidity is uncertain and has been and may continue to be material.

The health and well-being of

our employees and customers continue to be our top priorities as we continue navigating the challenges presented by the COVID-19 pandemic.

The financial results contained in this Quarterly Report on Form 10-Q reflect the continuing pandemic-related demand suppression experienced in the first half of 2021 in the regions in which we operate.

Though vaccine availability and vaccination rates are increasing, the COVID-19 pandemic is ongoing and the impacts of the virus on people and businesses continue to evolve as of the date of this report.

The full magnitude of the impact of COVID-19 on our financial condition, future results of operations, and future cash flows and liquidity is uncertain and has been and may continue to be material.

Results of Operations

Three months ended March 31, 2021 compared to the three months ended March 31, 2020

Our financial results for the first quarter of 2021 improved from a net loss of $222.3 million for the three months ended March 31, 2020 to a net loss of $62.2 million for the three months ended March 31, 2021.

The increase was primarily driven by a gain of $64.9 million primarily related to the Sale-Leaseback Transaction we closed on February 23, 2021 and March 12, 2021, our 2020 goodwill impairment of $67.9 million related to our Refining and Retail segments, and our 2020 other-than-temporary impairment of $45.3 million related to our equity investment in Laramie Energy, and a $193.0 million favorable change in lower of cost or net realizable value adjustments, partially offset by a 28% decrease in refining sales volumes, unfavorable crack spreads primarily due to decreased demand as a result of the COVID-19 pandemic, and an increase in the RINs mark-to-market expense driven by higher RINs prices.

Three months ended June 30, 2021 compared to the three months ended June 30, 2020

Our financial results for the second quarter of 2021 declined from a net loss of $40.6 million for the three months ended June 30, 2020 to a net loss of $109.0 million for the three months ended June 30, 2021.

The decrease was primarily driven by a $158.4 million unfavorable change in lower of cost or net realizable value inventory adjustments and increased RINs expenses driven by higher RINs prices, partially offset by a favorable change in inventory valuation adjustments at our Hawaii refinery and improved crack spreads driven by increased refined product demand due to the continuing economic recovery from the COVID-19 pandemic.

Adjusted EBITDA and Adjusted Net Loss.

For the three months ended March 31, 2021, Adjusted EBITDA was a loss of $43.3 million compared to earnings of $13.7 million for the three months ended March 31, 2020.

The decrease was primarily related to unfavorable crack spreads and lower sales volumes across our operating segments related to COVID-19 demand destruction, and RINs mark-to-market expense driven by higher RINs prices, partially offset by favorable feedstock costs in Hawaii.

For the three months ended March 31, 2021, Adjusted Net Loss was a loss of $84.4 million compared to a loss of $27.3 million for the three months ended March 31, 2020.

The decrease was primarily related to the factors described above for the decrease in Adjusted EBITDA.

The following tables summarize our consolidated results of operations for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 (in thousands).

For the three months ended June 30, 2021, Adjusted EBITDA was a loss of $6.7 million compared to a loss of $50.3 million for the three months ended June 30, 2020.

The increase was primarily related to improved crack spreads driven by increased refined product demand, favorable realized derivatives, and a 23% increase in sales volumes in our Refining segment, partially offset by a higher RINs mark-to-market expense driven by higher RINs prices, unfavorable feedstock costs at our Washington refinery, a 31% decrease in fuel margins at our Retail segment related to rising crude oil prices, and an unfavorable increase in internal fuel consumption at our Refining segment due to higher throughput volumes and rising crude oil prices.

For the three months ended June 30, 2021, Adjusted Net Loss was a loss of $48.0 million compared to a loss of $90.8 million for the three months ended June 30, 2020.

The improvement was primarily related to the factors described above for the increase in Adjusted EBITDA.

Six months ended June 30, 2021 compared to the six months ended June 30, 2020

Our financial results for the second quarter of 2021 improved from a net loss of $262.9 million for the six months ended June 30, 2020 to a net loss of $171.2 million for the six months ended June 30, 2021.

The increase was primarily driven by favorable feedstock, purchased product, and derivative costs at our Hawaii refinery, favorable inventory valuation adjustments in our Refining segment, the goodwill impairment of $67.9 million in our Refining and Retail segments and the other-than-temporary impairment of $45.3 million related to our equity investment in Laramie Energy in the six months ended June 30, 2020 with no such impairments in 2021, and a gain of $63.9 million in the six months ended June 30, 2021 related to the Sale-Leaseback Transactions with no such gain in 2020.

These benefits were partially offset by increased RINs expenses driven by higher RINs prices, the price lag impact associated with certain product sales contracts at our Hawaii refinery, higher costs associated with our inventory intermediation step-out obligations, and a $21.0 million tax benefit recorded in 2020 with no such benefit recorded in 2021.

Adjusted EBITDA and Adjusted Net Loss.

For the six months ended June 30, 2021, Adjusted EBITDA was a loss of $50.0 million compared to a loss of $36.7 million for the six months ended June 30, 2020.

The decline was primarily related to the price lag impact associated with certain product sales contracts at our Hawaii refinery, increased fees related to our intermediation agreements, and higher RINs mark-to-market expenses related to prior year net obligations due to increasing RINs prices, partially offset by favorable feedstock, purchased product, and realized derivative costs at our Hawaii refinery and favorable inventory valuation adjustments at our Wyoming and Washington refineries.

Other factors impacting our results period over period include a 23% decrease in fuel margins at our Retail segment related to rising crude oil prices.

For the six months ended June 30, 2021, Adjusted Net Loss was $132.4 million compared to a loss of approximately $118.0 million for the six months ended June 30, 2020.

The decline was primarily related to the same factors described above for the decrease in Adjusted EBITDA.

The following tables summarize our consolidated results of operations for the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020 (in thousands).

The following should be read in conjunction with our condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

Three Months Ended March 31,

Three Months Ended June 30,

2021 2020 $ Change % Change (1)

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Depreciation, depletion, and amortization 23,548 22,128 1,420 6 %

Loss (gain) on sale of assets, net 510 — 510 NM

General and administrative expense (excluding depreciation) 12,201 10,221 1,980 19 %

Acquisition and integration costs (352) 90 (442) (491) %

Total operating expenses 1,302,026 540,744

Operating loss (84,501) (25,443)

Other income (expense)

Interest expense and financing costs, net (17,186) (16,414) (772) (5) %

Debt extinguishment and commitment costs (6,628) — (6,628) NM

Other income (expense), net (36) 455 (491) (108) %

Equity losses from Laramie Energy, LLC — (1,874) 1,874 100 %

Total other income (expense), net (23,850) (17,833)

Loss before income taxes (108,351) (43,276)

Income tax benefit (expense) (607) 2,716 (3,323) (122) %

Net loss $ (108,958) $ (40,560)

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(1) NM - Not meaningful

Six Months Ended June 30,

2021 2020 $ Change % Change (1)

Revenues $ 2,106,205 $ 1,719,384 $ 386,821 22 %

Cost of revenues (excluding depreciation) 2,086,161 1,651,489 434,672 26 %

Operating expense (excluding depreciation) 143,009 140,418 2,591 2 %

Depreciation, depletion, and amortization 46,428 43,411 3,017 7 %

Impairment expense — 67,922 (67,922) (100) %

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(1) NM - Not meaningful

The following tables summarize our operating income (loss) by segment for the three months ended March 31, 2021 and 2020 (in thousands).

The following tables summarize our operating income (loss) by segment for the three and six months ended June 30, 2021 and 2020 (in thousands).

The following should be read in conjunction with our condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

Three months ended March 31, 2021 Refining Logistics Retail Corporate, Eliminations and Other (1) Total

Three months ended June 30, 2021 Refining Logistics Retail Corporate, Eliminations and Other (1) Total

Revenues $ 1,155,847 $ 48,706 $ 118,446 $ (105,474) $ 1,217,525

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Depreciation, depletion, and amortization 14,561 5,377 2,874 736 23,548

Impairment expense — — — — —

Loss (gain) on sale of assets, net 1,664 (21) (1,133) — 510

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Operating income (loss) $ (99,119) $ 14,542 $ 12,651 $ (12,575) $ (84,501)

Three months ended March 31, 2020 Refining Logistics Retail Corporate, Eliminations and Other (1) Total

Three months ended June 30, 2020 Refining Logistics Retail Corporate, Eliminations and Other (1) Total

Revenues $ 455,301 $ 42,132 $ 79,621 $ (61,753) $ 515,301

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Depreciation, depletion, and amortization 12,706 5,902 2,664 856 22,128

General and administrative expense (excluding depreciation) — — — 10,221 10,221

Acquisition and integration costs — — — 90 90

Operating income (loss) $ (36,757) $ 6,303 $ 16,180 $ (11,169) $ (25,443)

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(1) Includes eliminations of intersegment Revenues and Cost of revenues (excluding depreciation) of $105.5 million and $61.8 million for the three months ended June 30, 2021 and 2020, respectively.

Six months ended June 30, 2021 Refining Logistics Retail Corporate, Eliminations and Other (1) Total

Revenues $ 1,994,602 $ 90,015 $ 209,634 $ (188,046) $ 2,106,205

Cost of revenues (excluding depreciation) 2,074,274 47,396 152,543 (188,052) 2,086,161

Operating expense (excluding depreciation) 101,282 7,390 34,337 — 143,009

Depreciation, depletion, and amortization 28,625 10,631 5,534 1,638 46,428

Gain on sale of assets, net (19,595) (21) (44,786) — (64,402)

General and administrative expense (excluding depreciation) — — — 24,086 24,086

Acquisition and integration costs — — — 86 86

Operating income (loss) $ (189,984) $ 24,619 $ 62,006 $ (25,804) $ (129,163)

Six months ended June 30, 2020 Refining Logistics Retail Corporate, Eliminations and Other (1) Total

Revenues $ 1,603,427 $ 101,282 $ 182,434 $ (167,759) $ 1,719,384

Cost of revenues (excluding depreciation) 1,643,320 59,116 116,812 (167,759) 1,651,489

Operating expense (excluding depreciation) 101,629 6,518 32,271 — 140,418

Depreciation, depletion, and amortization 25,700 10,569 5,463 1,679 43,411

Impairment expense 38,105 — 29,817 — 67,922

Loss (gain) on sale of assets, net — — — — —

General and administrative expense (excluding depreciation) — — — 22,005 22,005

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________________________________________________________

(1) Includes eliminations of intersegment Revenues and Cost of revenues (excluding depreciation) of $82.6 million and $106.0 million for the three months ended March 31, 2021 and 2020, respectively.

Below is a summary of key operating statistics for the refining segment for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

(1) Includes eliminations of intersegment Revenues and Cost of revenues (excluding depreciation) of $188.0 million and $167.8 million for the six months ended June 30, 2021 and 2020, respectively.

Below is a summary of key operating statistics for the refining segment for the three and six months ended June 30, 2021 and 2020:

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Total Refining Segment

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DD&A per bbl ($/throughput bbl) 1.49 1.49 1.62 1.46

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Wyoming Refinery

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Our production costs are included in Operating expense (excluding depreciation) on our condensed consolidated statement of operations, which also includes costs related to our bulk marketing operations.

(3) In 2020, following the implementation of IMO 2020, we established the 3-1-2 Singapore Crack Spread (or three barrels of Brent crude oil converted into one barrel of gasoline and two barrels of distillates (diesel and jet fuel)) as a new benchmark for our Hawaii operations.

By removing the high sulfur fuel oil reference in the index, we believe the 3-1-2 Singapore Crack Spread is the most representative market indicator of our current operations in Hawaii.

(3) We believe the 3-1-2 Singapore Crack Spread (or three barrels of Brent crude oil converted into one barrel of gasoline and two barrels of distillates (diesel and jet fuel)) is the most representative market indicator of our current operations in Hawaii.

(4) We believe the Pacific Northwest 5-2-2-1 Index is the most representative market indicator for our operations in Tacoma, Washington.

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We believe the Wyoming 3-2-1 Index is the most representative market indicator for our operations in Wyoming.

The Wyoming 3-2-1 Index is computed by taking two parts gasoline and one part distillates (ULSD) as created from three barrels of West Texas Intermediate Crude Oil (“WTI”).

The Wyoming 3-2-1

Index is computed by taking two parts gasoline and one part distillates (ULSD) as created from three barrels of West Texas Intermediate Crude Oil (“WTI”).

Pricing is based 50% on applicable product pricing in Rapid City, South Dakota, and 50% on applicable product pricing in Denver, Colorado.

Below is a summary of key operating statistics for the retail segment for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

Below is a summary of key operating statistics for the retail segment for the three and six months ended June 30, 2021 and 2020:

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Retail Segment

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Adjusted Gross Margin

Adjusted Gross Margin is defined as (i) operating income (loss) plus operating expense (excluding depreciation), impairment expense, inventory valuation adjustment (which adjusts for timing differences to reflect the economics of our inventory financing agreements, including lower of cost or net realizable value adjustments, the impact of the embedded derivative repurchase or terminal obligations, and purchase price allocation adjustments), depreciation, depletion, and amortization (“DD&A”);

Renewable Identification Numbers (“RINs”) loss (gain) in excess of net obligation (which represents the income statement effect of reflecting our RINs liability on a net basis), (gain) loss on sale of assets, and unrealized loss (gain) on derivatives or (ii) revenues less cost of revenues (excluding depreciation) plus inventory valuation adjustment, unrealized loss (gain) on derivatives, and RINs loss (gain) in excess of net obligation.

Adjusted Gross Margin is defined as (i) operating income (loss) plus operating expense (excluding depreciation), impairment expense, inventory valuation adjustment (which adjusts for timing differences to reflect the economics of our inventory financing agreements, including lower of cost or net realizable value adjustments, the impact of the embedded derivative repurchase or terminal obligations, contango (gains) and backwardation losses associated with our Washington inventory and intermediation obligation, and purchase price allocation adjustments), depreciation, depletion, and amortization (“DD&A”);

Renewable Identification Numbers (“RINs”) loss (gain) in excess of net obligation (which represents the income statement effect of reflecting our RINs liability on a net basis), loss (gain) on sale of assets, and unrealized loss (gain) on derivatives or (ii) revenues less cost of revenues (excluding depreciation) plus inventory valuation adjustment, unrealized loss (gain) on derivatives, and RINs loss (gain) in excess of net obligation.

We define cost of revenues (excluding depreciation) as the hydrocarbon-related costs of inventory sold, transportation costs of delivering product to customers, crude oil consumed in the refining process, costs to satisfy our RINs and environmental credit obligations, and certain hydrocarbon fees and taxes.

Cost of revenues (excluding depreciation) also includes the unrealized gain (loss) on derivatives and the inventory valuation adjustment that we exclude from Adjusted Gross Margin.

Beginning in the second quarter of 2020, Adjusted Gross Margin also includes the contango gains and backwardation losses associated with our Washington inventory and intermediation obligation.

Prior to 2020, contango gains and backwardation (losses) captured by our Washington intermediation agreement were excluded from Adjusted Gross Margin (as part of the inventory valuation adjustment).

This change to our non-GAAP information was made to reflect the favorable or unfavorable impact of the market structure on the profitability of our Washington refinery consistent with the presentation of such impacts on our other refineries.

Also beginning in the third quarter of 2020, Adjusted Gross Margin excludes the LIFO layer liquidation impacts associated with our Washington inventory.

We have recast the non-GAAP information for the three months ended March 31, 2020 to conform to the current period presentation.

Beginning in the third quarter of 2020, Adjusted Gross Margin excludes the LIFO layer liquidation impacts associated with our Washington inventory.

There was no LIFO liquidation adjustment for the three and six months ended June 30, 2020.

Management believes Adjusted Gross Margin is an important measure of operating performance and uses Adjusted Gross Margin per barrel to evaluate operating performance and compare profitability to other companies in the industry and to industry benchmarks.

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The following tables present a reconciliation of Adjusted Gross Margin to the most directly comparable GAAP financial measure, operating income (loss), on a historical basis, for selected segments, for the periods indicated (in thousands):

Three months ended March 31, 2021 Refining Logistics Retail

Three months ended June 30, 2021 Refining Logistics Retail

Operating income (loss) $ (99,119) $ 14,542 $ 12,651

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RINs loss in excess of net obligation 25,207 — —

Unrealized loss on derivatives 1,404 — —

Adjusted Gross Margin (1) $ 19,208 $ 23,392 $ 31,775

Three months ended June 30, 2020 Refining Logistics Retail

Operating income (loss) $ (36,757) $ 6,303 $ 16,180

Operating expense (excluding depreciation)

49,385 2,247 15,395

Depreciation, depletion, and amortization 12,706 5,902 2,664

Inventory valuation adjustment (35,979) — —

RINs loss in excess of net obligation 10,738 — —

Unrealized gain on derivatives (22,431) — —

Adjusted Gross Margin (1) (2) $ (22,338) $ 14,452 $ 34,239

Three months ended March 31, 2020 Refining Logistics Retail

Six months ended June 30, 2021 Refining Logistics Retail

Operating income (loss) $ (189,984) $ 24,619 $ 62,006

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Depreciation, depletion, and amortization 28,625 10,631 5,534

Loss (gain) on sale of assets, net (19,595) (21) (44,786)

Inventory valuation adjustment 39,459 — —

LIFO liquidation adjustment 4,151 — —

RINs loss in excess of net obligation 53,977 — —

Unrealized gain on derivatives (2,608) — —

Adjusted Gross Margin (1) $ 15,307 $ 42,619 $ 57,091

Six months ended June 30, 2020 Refining Logistics Retail

Operating income (loss) $ (205,327) $ 25,079 $ (1,929)

Operating expense (excluding depreciation)

101,629 6,518 32,271

Depreciation, depletion, and amortization 25,700 10,569 5,463

Impairment expense 38,105 — 29,817

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____________________________________________________________________________

(1) For the three months ended March 31, 2021, there was no impairment expense.

(2) For the three months ended March 31, 2020, there was no LIFO liquidation adjustment or loss (gain) on sale of assets.

(1) For the three and six months ended June 30, 2021, and the three months ended June 30, 2020, there was no impairment expense recorded in Operating income (loss).

(2) For the three and six months ended June 30, 2020, there was no loss (gain) on sale of assets or LIFO liquidation adjustment recorded in Operating income (loss).

Adjusted Net Income (Loss) and Adjusted EBITDA

Beginning in the second quarter of 2020, Adjusted Net Income (Loss) also includes the contango gains and backwardation losses associated with our Washington inventory and intermediation obligation.

Prior to 2020, contango gains and backwardation (losses) captured by our Washington intermediation agreement were excluded from Adjusted Net Income (Loss) (as part of the inventory valuation adjustment).

Also beginning in the third quarter of 2020, Adjusted Net Income (Loss) excludes the LIFO layer liquidation impacts associated with our Washington inventory.

We have recast the non-GAAP information for the three months ended March 31, 2020 to conform to the current period presentation.

Adjusted Net Income (Loss) is defined as Net income (loss) excluding changes in the value of contingent consideration and common stock warrants, acquisition and integration costs, unrealized (gain) loss on derivatives, debt extinguishment and commitment costs, increase in (release of) tax valuation allowance and other deferred tax items, inventory valuation adjustment (which adjusts for timing differences to reflect the economics of our inventory financing agreements, including lower of cost or net realizable value adjustments, the impact of the embedded derivative repurchase or terminal obligations, contango (gains) and backwardation losses associated with our Washington inventory and intermediation obligation, and purchase price allocation adjustments), severance costs, impairment expense, (gain) loss on sale of assets, Par’s share of Laramie Energy’s unrealized loss (gain) on derivatives, RINs loss (gain) in excess of net obligation, and impairment expense associated with our investment in Laramie Energy and our share of Laramie Energy’s asset impairment losses in excess of our basis difference.

Beginning in the third quarter of 2020, Adjusted Net Income (Loss) excludes the LIFO layer liquidation impacts associated with our Washington inventory.

There was no LIFO liquidation adjustment for the three and six months ended June 30, 2020.

Adjusted EBITDA is Adjusted Net Income (Loss) excluding interest expense and financing costs, income taxes, DD&A, and equity losses (earnings) from Laramie Energy, excluding Par’s share of unrealized loss (gain) on derivatives, impairment of Par’s investment, and our share of Laramie Energy’s asset impairment losses in excess of our basis difference.

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The following table presents a reconciliation of Adjusted Net Loss and Adjusted EBITDA to the most directly comparable GAAP financial measure, Net Loss, on a historical basis for the periods indicated (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Net Income (Loss) $ (108,958) $ (40,560) $ (171,185) $ (262,897)

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Severance costs — 96 16 245

Gain on sale of assets, net (64,912) —

Loss (gain) on sale of assets, net 510 — (64,402) —

Impairment expense — — — 67,922

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(1) Includes increases in (releases of) our valuation allowance associated with business combinations and changes in deferred tax assets and liabilities that are not offset by a change in the valuation allowance.

These tax expenses (benefits) are included in Income tax benefit on our condensed consolidated statements of operations.

These tax expenses (benefits) are included in Income tax benefit (expense) on our condensed consolidated statements of operations.

(2) Included in Equity losses from Laramie Energy, LLC on our condensed consolidated statements of operations.

(3) For the three months ended March 31, 2021 and 2020, there was no change in value of contingent consideration.

(3) For the three and six months ended June 30, 2021 and 2020, there was no change in value of contingent consideration.

Factors Impacting Segment Results

Three months ended March 31, 2021 compared to the three months ended March 31, 2020

Operating loss for our refining segment was $90.9 million for the three months ended March 31, 2021, an increase of $77.7 million compared to operating loss of $168.6 million for the three months ended March 31, 2020.

The increase in profitability was primarily driven by a $193.0 million favorable change in lower of cost or net realizable value adjustments and favorable feedstock costs at our Hawaii refinery, partially offset by a 28% decrease in sales volume, a $72.0 million increase in RINs mark-to-market expense related to our gross RINs obligation, and unfavorable crack spreads primarily

due to decreased demand as a result of the COVID-19 pandemic.

Other factors impacting our results period over period include a $7.3 million favorable FIFO impact in 2021 compared to a $15.0 million unfavorable FIFO impact in the same period in 2020 at our Wyoming refinery, our 2020 goodwill impairment of $38.1 million, and a 2021 gain of $21.3 million primarily related to the sale-leaseback transactions we closed on February 23, 2021 and March 12, 2021.

Operating income for our logistics segment was $10.1 million for the three months ended March 31, 2021, a decrease of $8.7 million compared to operating income of $18.8 million for the three months ended March 31, 2020.

The decrease is due to a net 28% and 12% lower throughput across our Hawaii and Washington logistics assets, respectively, primarily due to decreased demand as a result of the COVID-19 pandemic and Washington refinery turnaround activities.

Operating income for our retail segment was $49.4 million for the three months ended March 31, 2021, an increase of $67.5 million compared to operating loss of $18.1 million for the three months ended March 31, 2020.

The increase was primarily due to our 2020 goodwill impairment of $29.8 million with no corresponding impairment in 2021 and a gain of $43.7 million primarily related to the sale-leaseback transactions we closed on February 23, 2021 and March 12, 2021.

Three months ended June 30, 2021 compared to the three months ended June 30, 2020

Operating loss for our refining segment was $99.1 million for the three months ended June 30, 2021, a decline of $62.3 million compared to operating loss of $36.8 million for the three months ended June 30, 2020.

The decrease in profitability was primarily driven by a $50.3 million increase in RINs expenses driven by higher RINs prices, a $158.4 million unfavorable change in lower of cost or net realizable value inventory adjustments, and an unfavorable change in feedstock costs at our Washington refinery, partially offset by a 23% increase in sales volume and favorable crack spreads as demand increases due to the continued economic recovery from the COVID-19 pandemic.

Other factors impacting our results period over period include higher internal fuel consumption, higher derivative costs, higher inventory financing costs, and higher depreciation expenses due to recently-completed capital projects.

Operating income for our logistics segment was $14.5 million for the three months ended June 30, 2021, an increase of $8.2 million compared to operating income of $6.3 million for the three months ended June 30, 2020.

The increase is due to net 34% higher throughput across our Wyoming logistics assets and 55% higher throughput across our Hawaii assets related to increased sales volumes, especially across the neighbor islands in Hawaii, primarily due to increased demand as COVID-19 restrictions ease.

Operating income for our retail segment was $12.7 million for the three months ended June 30, 2021, a decrease of $3.5 million compared to operating income of $16.2 million for the three months ended June 30, 2020.

The decrease was primarily due to a 31% decrease in fuel margins related to rising crude oil prices and $1.4 million of rent expense in the second quarter of 2021 related to the Sale-Leaseback Transactions we closed on February 23 and March 12, 2021, partially offset by a 28% increase in fuel sales volumes.

Six months ended June 30, 2021 compared to the six months ended June 30, 2020

Operating loss for our refining segment was $190.0 million for the six months ended June 30, 2021, an improvement of $15.3 million compared to an operating loss of $205.3 million for the six months ended June 30, 2020.

The decrease in the reported loss was primarily driven by favorable feedstock and derivative costs and a favorable change in lower of cost or net realizable value inventory adjustments, partially offset by a $128.3 million increase in RINs expenses driven by higher RINs prices, higher costs associated with our inventory intermediation step-out obligations, and the price lag impact associated with certain sales contracts at our Hawaii refinery.

Other factors impacting our results period over period include a favorable FIFO impact in 2021 at our Wyoming refinery, no impairment in 2021 as compared to our 2020 goodwill impairment of $38.1 million, and a 2021 gain of $19.6 million primarily related to the Sale-Leaseback Transactions we closed on February 23 and March 12, 2021.

Operating income for our logistics segment was $24.6 million for the six months ended June 30, 2021, which was relatively consistent with $25.1 million for the six months ended June 30, 2020.

Operating income for our retail segment was $62.0 million for the six months ended June 30, 2021, an increase of $63.9 million compared to an operating loss of $1.9 million for the six months ended June 30, 2020.

The increase in profitability is primarily due to a gain of $44.8 million primarily related to the Sale-Leaseback Transactions we closed on February 23 and March 12, 2021, no impairment in 2021 as compared to our 2020 goodwill impairment of $29.8 million, and an increase in sales volumes of 5%, partially offset by a decrease in fuel margins of 23% related to rising crude oil prices.

Adjusted Gross Margin

Three months ended March 31, 2021 compared to the three months ended March 31, 2020

For the three months ended March 31, 2021, our refining Adjusted Gross Margin was a loss of $3.9 million, a decrease of $43.5 million compared to income of $39.6 million for the three months ended March 31, 2020.

The decrease was primarily driven by a 28% decline in refining sales volumes, unfavorable crack spreads in Hawaii and Washington, and a $46.9 million RINs mark-to-market expense related to the 2019 and 2020 net obligations due to increasing RINs prices, partially offset by favorable feedstock costs.

Adjusted Gross Margin for the Hawaii refineries decreased from $0.24 per barrel during the three months ended March 31, 2020 to a loss of $0.46 per barrel during the three months ended March 31, 2021 primarily due to a 35% decrease in sales volume, a $26.1 million RINs mark-to-market expense, and unfavorable crack spreads, partially offset by favorable feedstock costs.

Adjusted Gross margin for the Wyoming refinery decreased $3.16 per barrel primarily due to a 21% decrease in sales volume and an $11.2 million RINs mark-to-market expense.

Adjusted Gross Margin for the Washington refinery decreased $11.27 per barrel primarily due to declining crack spreads, a $9.6 million RINs mark-to-market expense, and a 10% decrease in sales volumes.

For the three months ended March 31, 2021, our logistics Adjusted Gross Margin was $19.2 million, a decrease of $8.5 million compared to $27.7 million for the three months ended March 31, 2020.

For the three months ended March 31, 2021, our retail Adjusted Gross Margin was $25.3 million, a decrease of $6.1 million when compared to $31.4 million for the three months ended March 31, 2020.

The decrease was primarily due to a 15% decrease in fuel margins related to rising crude prices and a 13% decline in sales volumes.

Three months ended June 30, 2021 compared to the three months ended June 30, 2020

For the three months ended June 30, 2021, our refining Adjusted Gross Margin was $19.2 million, an increase of $41.5 million compared to a loss of $22.3 million for the three months ended June 30, 2020.

The increase was primarily driven by improved crack spreads and a 23% increase in refining sales volumes, partially offset by higher RINs mark-to-market expenses driven by increasing RINs prices and rising feedstock costs at the Washington refinery.

Adjusted Gross Margin for the Hawaii refineries increased from a loss of $6.96 per barrel during the three months ended June 30, 2020 to income of $0.34 per barrel during the three months ended June 30, 2021 primarily due to improved contract terms and crack spreads, a 26% increase in sales volume, and favorable feedstock and purchased product costs, partially offset by increased RINs costs driven by a $12.7 million higher RINs mark-to-market expense and an unfavorable increase in logistics costs.

Adjusted Gross Margin for the Wyoming refinery increased $4.03 per barrel primarily due to improved crack spreads, a FIFO benefit related to increasing crude oil prices, and a 38% increase in sales volumes, partially offset by increased RINs costs driven by a $4.8 million higher RINs mark-to-market expense.

Adjusted Gross Margin for the Washington refinery decreased $3.82 per barrel primarily due to a $4.1 million higher RINs mark-to-market expense, compressed heavy product spreads, and unfavorable feedstock costs, partially offset by improved crack spreads and an 11% increase in sales volume.

For the three months ended June 30, 2021, our logistics Adjusted Gross Margin was $23.4 million, an increase of $8.9 million compared to $14.5 million for the three months ended June 30, 2020.

The increase is primarily due to net 34% higher throughput across our Wyoming logistics assets and 55% higher throughput across our Hawaii logistics assets due to increased sales volumes in Hawaii, especially across the neighboring islands, driven by easing travel restrictions related to the continued recovery from the COVID-19 pandemic.

For the three months ended June 30, 2021, our retail Adjusted Gross Margin was $31.8 million, a decrease of $2.4 million when compared to $34.2 million for the three months ended June 30, 2020.

The decrease was primarily due to a 31% decrease in fuel margins related to rising crude oil prices, partially offset by a 28% increase in sales volumes from the ongoing recovery.

Six months ended June 30, 2021 compared to the six months ended June 30, 2020

For the six months ended June 30, 2021, our refining Adjusted Gross Margin was $15.3 million, a decrease of $1.9 million compared to $17.2 million for the six months ended June 30, 2020.

The decrease was primarily due to higher

RINs expense driven by increasing RINs prices and higher inventory financing costs, partially offset by lower feedstock costs in Hawaii.

Adjusted Gross Margin for the Hawaii refineries improved from a loss of $2.73 per barrel during the six months ended June 30, 2020 to a loss of $0.05 per barrel during the six months ended June 30, 2021 primarily due to favorable feedstock and purchased product costs and realized derivative favorability, partially offset by a 12% decrease in sales volumes, the price lag impact associated with certain sales contracts, and increased RINs costs driven by a $39.8 million higher RINs mark-to-market expense.

Adjusted Gross Margin for the Wyoming refinery increased $4.35 per barrel primarily due to an $11.9 million favorable FIFO impact in 2021 compared to a $10.5 million unfavorable FIFO impact in the same period in 2020 and favorable crack spreads, partially offset by increased RINs costs driven by a $14.0 million higher RINs mark-to-market expense and higher feedstock costs.

Adjusted Gross Margin for the Washington refinery decreased $7.68 per barrel primarily due to higher feedstock costs, compressed heavy product spreads, and a $12.1 million increase in RINs mark-to-market expense, partially offset by lower logistics costs.

For the six months ended June 30, 2021, our logistics Adjusted Gross Margin was $42.6 million, which was relatively consistent with our logistics Adjusted Gross Margin of $42.2 million for the six months ended June 30, 2020.

For the six months ended June 30, 2021, our retail Adjusted Gross Margin was $57.1 million, a decrease of $8.5 million compared to $65.6 million for the six months ended June 30, 2020.

The decrease was primarily due to a 23% decrease in fuel margins related to rising crude oil prices, partially offset by a 5% increase in sales volumes from the ongoing recovery.

Discussion of Consolidated Results

Three months ended March 31, 2021 compared to the three months ended March 31, 2020

For the three months ended March 31, 2021, revenues were $0.9 billion, a $0.3 billion decrease compared to $1.2 billion for the three months ended March 31, 2020.

The decrease was primarily due to a decrease of $0.3 billion in third-party refining segment revenue as a result of a 28% decrease in refining sales volumes and a decrease in average product cracks, partially offset by an increase in refined product prices related to higher crude oil prices.

Brent crude oil prices improved to $61.32 per barrel during the first quarter of 2021 compared to $50.82 per barrel during the first quarter of 2020, and WTI crude oil prices improved to $58.14 per barrel during the first quarter of 2021 compared to $45.98 per barrel during the first quarter of 2020.

Three months ended June 30, 2021 compared to the three months ended June 30, 2020

For the three months ended June 30, 2021, revenues were $1.2 billion, a $0.7 billion increase compared to $0.5 billion for the three months ended June 30, 2020.

The increase was primarily due to an increase of $0.7 billion in third-party refining segment revenue as a result of increases in Brent and WTI crude oil prices, a 23% increase in refining sales volumes, and an increase in average product cracks.

Brent crude oil prices recovered to $69.08 per barrel during the second quarter of 2021 compared to $33.39 per barrel during the second quarter of 2020, and WTI crude oil prices recovered to $66.17 per barrel during the second quarter of 2021 compared to $28.00 per barrel during the second quarter of 2020.

Cost of Revenues (Excluding Depreciation).

For the three months ended March 31, 2021, cost of revenues (excluding depreciation) was $0.9 billion, a $0.3 billion decrease compared to $1.2 billion for the three months ended March 31, 2020.

The decrease was primarily driven by lower refining volumes as discussed above, a $193.0 million favorable change in in lower of cost or net realizable value adjustments, and a decrease in purchased products volumes, partially offset by increases to cost of revenues caused by higher Brent and WTI crude oil prices, and a $72.0 million increase in the RINs mark-to-market expense related to our gross RINs obligation.

Other factors impacting our results period over period are lower purchased product, feedstock, and logistics costs and unfavorable derivative activity.

For the three months ended June 30, 2021, cost of revenues (excluding depreciation) was $1.2 billion, a $0.8 billion increase compared to $0.4 billion for the three months ended June 30, 2020.

The increase was primarily driven by higher Brent and WTI crude oil prices and higher refining volumes as discussed above, a $158.4 million unfavorable change in lower of cost or net realizable value adjustments, higher feedstock costs at our Washington refinery, and a $50.3 million increase in the RINs expense driven by higher RINs prices.

Operating Expense (Excluding Depreciation).

For the three months ended March 31, 2021, operating expense (excluding depreciation) was $74.2 million, which was relatively consistent with $73.4 million for the three months ended March 31, 2020.

For the three months ended June 30, 2021, operating expense (excluding depreciation) was $68.8 million, which was relatively consistent with $67.0 million for the three months ended June 30, 2020.

Depreciation, Depletion, and Amortization .

For the three months ended March 31, 2021, DD&A was $22.9 million, which was relatively consistent with $21.3 million for the three months ended March 31, 2020.

For the three months ended June 30, 2021, DD&A was $23.5 million, which was relatively consistent with $22.1 million for the three months ended June 30, 2020.

Loss on Sale of Assets, Net.

During the three months ended June 30, 2021, we recorded a loss of $0.5 million primarily related to the sale and disposal of certain retail locations.

No such gain or loss was recorded during the three months ended June 30, 2020.

General and Administrative Expense (Excluding Depreciation).

For the three months ended June 30, 2021, general and administrative expense (excluding depreciation) was $12.2 million, an increase of $2.0 million compared to $10.2 million for the three months ended June 30, 2020.

The increase was primarily due to an increase in employee costs and the use of outside services.

Acquisition and Integration Costs.

For the three months ended June 30, 2021, we recorded an acquisition and integration gain of $0.4 million, which was relatively consistent with $0.1 million of costs incurred during the three months ended June 30, 2020.

Interest Expense and Financing Costs, Net .

For the three months ended June 30, 2021, our interest expense and financing costs were $17.2 million, an increase of $0.8 million compared to $16.4 million for the three months ended June 30, 2020.

The change was driven by a $2.3 million increase in interest expense and financing costs related to the 12.875% Senior

Secured Notes issued in June 2020.

This increase was partially offset by a decrease of $0.8 million due to the reduced principal and lower variable interest rates on our Term Loan B Facility, a $0.4 million decrease related to debt fully repaid during the six months ended June 30, 2021, and a net $0.2 million decrease in interest expense related to our inventory financing agreements.

Debt Extinguishment and Commitment Costs.

For the three months ended June 30, 2021, our debt extinguishment and commitment costs were $6.6 million and primarily represent extinguishment costs associated with the repayment of a portion of our 12.875% Senior Secured Notes on June 14, 2021.

Please read Note 9—Debt to our condensed consolidated financial statements for further discussion.

No such costs were incurred for the three months ended June 30, 2020.

Equity Earnings (Losses) from Laramie Energy, LLC .

For the three months ended June 30, 2021, there were no equity earnings (losses) from Laramie Energy, compared to equity losses of $1.9 million for the three months ended June 30, 2020.

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 has been reduced to zero.

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

Income Taxes.

For the three months ended June 30, 2021, we recorded income tax expense of $0.6 million primarily related to foreign taxes.

For the three months ended June 30, 2020, we recorded an income tax benefit of $2.7 million primarily related to an increase in our net operating loss carryforwards.

Six months ended June 30, 2021 compared to the six months ended June 30, 2020

For the six months ended June 30, 2021, revenues were $2.1 billion, a $0.4 billion increase compared to $1.7 billion for the six months ended June 30, 2020.

The increase was primarily due to an increase of $0.4 billion in third-party revenues at our refining segment primarily as a result of higher crude oil prices, partially offset by a 7% decrease in refining sales volumes.

Average Brent crude oil prices recovered to $65.22 in the six months ended June 30, 2021 compared to $42.10 per barrel in the six months ended June 30, 2020, and WTI crude oil prices recovered to $62.18 per barrel during the six months ended June 30, 2021 compared to $36.99 in the six months ended June 30, 2020.

Revenues at our retail segment increased $27.2 million primarily due to a 5% increase in sales volumes and a 9% increase in fuel prices.

Cost of Revenues (Excluding Depreciation).

For the six months ended June 30, 2021, cost of revenues (excluding depreciation) was $2.1 billion, a $0.4 billion increase compared to $1.7 billion for the six months ended June 30, 2020.

The increase was primarily due to increases in Brent and WTI crude oil prices as discussed above, a $128.3 million increase in the RINs expense driven by higher RINs prices, and higher inventory financing costs, partially offset by lower refining sales volumes and favorable purchased product and feedstock costs at our Hawaii refinery.

Other factors impacting our results period over period are a $34.6 million favorable change in lower of cost or net realizable value adjustments and lower crude oil sales.

Operating Expense (Excluding Depreciation).

For the six months ended June 30, 2021, operating expense (excluding depreciation) was $143.0 million, which was relatively consistent with $140.4 million for the six months ended June 30, 2020.

Depreciation, Depletion, and Amortization .

For the six months ended June 30, 2021, DD&A was $46.4 million, an increase of $3.0 million compared to $43.4 million for the six months ended June 30, 2020.

The increase was primarily due to Hawaii refinery turnaround amortization.

Impairment Expense.

During the three months ended March 31, 2020, we recorded goodwill impairment charges of $67.9 million related to our Refining and Retail segments as a result of the global economic impact of the COVID-19 pandemic and a steep decline in current and forecasted prices and demand for crude oil and refined products.

No such charge was recorded in 2021.

Gain on Sale of Assets.

During the three months ended March 31, 2021, we recorded a gain of $64.9 million primarily related to the Sale-Leaseback Transaction we closed on February 23, 2021 and March 12, 2021.

No such gain or loss was recorded during the three months ended March 31, 2020.

For the six months ended June 30, 2020, we recorded goodwill impairment charges of $67.9 million related to our Refining and Retail segments as a result of the global economic impact of the COVID-19 pandemic and a steep decline in current and forecasted prices and demand for crude oil and refined products.

No such expense was recorded during the six months ended June 30, 2021.

Gain on Sale of Assets, Net.

For the six months ended June 30, 2021, the gain on sale of assets, net was approximately $64.4 million and primarily related to the Sale-Leaseback Transactions we closed on February 23 and March 12, 2021.

No such gain was recorded during the six months ended June 30, 2020.

General and Administrative Expense (Excluding Depreciation).

For the three months ended March 31, 2021, general and administrative expense (excluding depreciation) was $11.9 million, which was relatively consistent with $11.8 million for the three months ended March 31, 2020.

For the six months ended June 30, 2021, general and administrative expense (excluding depreciation) was $24.1 million, an increase of $2.1 million compared to $22.0 million for the six months ended June 30, 2020.

The increase was primarily due to increased employee costs and an increase in the use of outside services.

Acquisition and Integration Costs.

For the six months ended June 30, 2021, acquisition and integration costs were not significant.

For the six months ended June 30, 2020, we incurred $0.8 million of integration costs primarily related to the Washington Acquisition.

Interest Expense and Financing Costs, Net .

For the three months ended March 31, 2021, our interest expense and financing costs were $18.2 million, relatively consistent with $18.7 million for the three months ended March 31, 2020.

For the six months ended June 30, 2021, our interest expense and financing costs were $35.3 million, an increase of $0.2 million when compared to $35.1 million for the six months ended June 30, 2020.

The increase was primarily due to a $5.9 million increase in interest expense and financing costs related to the 12.875% Senior Secured Notes issued in June 2020 and increased interest expense of $0.1 million related to the ABL Credit Facility.

These increases were partially offset by a decrease of $2.4 million due to the interest rate derivatives terminated as of March 31, 2021 primarily related to the Retail Property Term Loan and $2.1 million due to the reduced principal and lower variable interest rates on our Term Loan B Facility.

Other factors contributing to the decrease included a $0.8 million decrease in interest expense related to our inventory financing agreements and a $0.5 million decrease related to debt fully repaid during the six months ended June 30, 2021.

Please read Note 7—Inventory Financing Agreements and Note 9—Debt to our condensed consolidated financial statements for further discussion on our inventory financing and indebtedness, respectively.

Debt Extinguishment and Commitment Costs.

For the six months ended June 30, 2021, our debt extinguishment and commitment costs were $8.1 million and primarily represent $6.6 million in extinguishment costs associated with the redemption of $36.8 million of 12.875% Senior Secured Notes on June 14, 2021 and $1.4 million in extinguishment costs associated with the repayment of the Retail Property Term Loan on February 23, 2021.

Please read Note 9—Debt to our condensed consolidated financial statements for further discussion.

No such costs were incurred for the six months ended June 30, 2020.

Gain on Curtailment of Pension Obligation.

For the six months ended June 30, 2021, we recorded a $2.0 million gain on curtailment of pension obligation related to the March 2021 Wyoming Refining plan amendment.

Please read Note 2—Summary of Significant Accounting Policies to our condensed consolidated financial statements for further discussion.

No such gain was recorded during the six months ended June 30, 2020.

Change in Value of Common Stock Warrants .

For the three months ended March 31, 2020, the change in value of common stock warrants resulted in income of $4.3 million.

For the six months ended June 30, 2020, the change in value of common stock warrants resulted in a gain of $4.3 million.

During January and March 2020, one of our stockholders and its affiliates exercised the remaining 354,350 common stock warrants in exchange for 350,542 shares of common stock.

We estimated the fair value of our outstanding common stock warrants using the difference between the strike price of the warrant and the market price of our common stock.

During the three months ended March 31, 2020, our stock price decreased from $23.24 per share as of December 31, 2019 to $7.10 per share as of March 31, 2020.

During the three months ended March 31, 2021, there were no common stock warrants outstanding.

Equity Earnings from Laramie Energy, LLC .

For the three months ended March 31, 2021, there were no equity earnings (losses) from Laramie Energy, compared to equity losses of $45.0 million for the three months ended March 31, 2020.

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 has been reduced to zero.

We estimated the fair value of our outstanding common stock warrants and the income recognized upon exercise using the difference between the strike price of the warrant and the market price of our common stock.

For the three months ended March 31, 2020, our stock price decreased from $23.24 per share as of December 31, 2019 to $7.10 per share as of March 31, 2020.

During the six months ended June 30, 2021, there were no common stock warrants outstanding.

Equity Earnings (Losses) from Laramie Energy, LLC .

For the six months ended June 30, 2021, there were no equity earnings (losses) from Laramie Energy compared to equity losses of $46.9 million for the six months ended June 30, 2020.

The losses recorded in 2020 were primarily a result of an impairment of our investment in Laramie.

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.

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

Income Taxes.

For the three months ended March 31, 2021, we did not record any income taxes.

For the three months ended March 31, 2020, we recorded an income tax benefit of $18.2 million primarily driven by a $18.4 million benefit associated with a partial release of our valuation allowance in connection with indefinite-lived deferred tax assets from interest expense carryforwards with no expiration.

For the six months ended June 30, 2021, we recorded an income tax expense of $0.6 million primarily driven by foreign taxes.

For the six months ended June 30, 2020, we recorded an income tax benefit of $21.0 million primarily driven by an increase in our net operating loss carryforwards and the change in our indefinitely-lived goodwill due to the impairments.

Consolidating Condensed Financial Information

8 unchanged sentences

For purposes of the following condensed consolidating information, the Parent’s investment in its subsidiaries is accounted for under the equity method of accounting (dollar amounts in thousands).

As of March 31, 2021

As of June 30, 2021

Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc.

24 unchanged sentences

Accounts payable 1,237 156,977 1,478 159,692

Deferred revenue — 6,980 — 6,980

Accrued taxes 23 40,499 — 40,522

35 unchanged sentences

Operating lease right-of-use assets 3,714 367,850 (14,398) 357,166

Investment in Laramie Energy, LLC — — — —

Investment in subsidiaries 209,010 — (209,010) —

8 unchanged sentences

Accounts payable 2,401 103,067 1,477 106,945

Deferred revenue — 4,083 — 4,083

Accrued taxes 49 27,371 20 27,440

19 unchanged sentences

Total liabilities and stockholders’ equity $ 346,344 $ 2,080,147 $ (292,630) $ 2,133,861

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc.

5 unchanged sentences

Depreciation, depletion, and amortization 618 22,882 48 23,548

Impairment expense — — — —

Gain on sale of assets, net — (11,208) (53,704) (64,912)

Loss (gain) on sale of assets, net — 569 (59) 510

General and administrative expense (excluding depreciation) 3,104 9,097 — 12,201

5 unchanged sentences

Debt extinguishment and commitment costs — (6,628) — (6,628)

Other income (expense), net (6) (31) 1 (36)

Equity earnings (losses) from subsidiaries (104,361) — 104,361 —

Total other income (expense), net (105,571) (22,733) 104,454 (23,850)

Income (loss) before income taxes (108,941) (103,899) 104,489 (108,351)

Income tax benefit (expense) (1) (17) 28,655 (29,245) (607)

Net income (loss) $ (108,958) $ (75,244) $ 75,244 $ (108,958)

Adjusted EBITDA $ (3,110) $ (3,588) $ 25 $ (6,673)

Three Months Ended June 30, 2020

Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc.

and Subsidiaries

Revenues $ — $ 515,301 $ — $ 515,301

Operating expenses

Cost of revenues (excluding depreciation) — 441,278 — 441,278

Operating expense (excluding depreciation) — 68,210 (1,183) 67,027

Depreciation, depletion, and amortization 769 21,229 130 22,128

General and administrative expense (excluding depreciation) 2,628 7,593 — 10,221

Acquisition and integration costs — 90 — 90

Total operating expenses 3,397 538,400 (1,053) 540,744

Operating loss (3,397) (23,099) 1,053 (25,443)

Other income (expense)

Interest expense and financing costs, net (1,245) (14,610) (559) (16,414)

Other income (expense), net 2 453 — 455

Equity earnings (losses) from subsidiaries (35,920) — 35,920 —

Equity losses from Laramie Energy, LLC — — (1,874) (1,874)

Total other income (expense), net (37,163) (14,157) 33,487 (17,833)

Income (loss) before income taxes (40,560) (37,256) 34,540 (43,276)

Income tax benefit (expense) (1) — 7,814 (5,098) 2,716

Net income (loss) $ (40,560) $ (29,442) $ 29,442 $ (40,560)

Adjusted EBITDA $ (2,530) $ (48,999) $ 1,183 $ (50,346)

Six Months Ended June 30, 2021

Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc.

and Subsidiaries

Revenues $ — $ 2,106,181 $ 24 $ 2,106,205

Operating expenses

Cost of revenues (excluding depreciation) — 2,086,161 — 2,086,161

Operating expense (excluding depreciation) — 143,726 (717) 143,009

Depreciation, depletion, and amortization 1,284 45,001 143 46,428

Loss (gain) on sale of assets, net — (10,639) (53,763) (64,402)

General and administrative expense (excluding depreciation) 6,209 17,877 — 24,086

Acquisition and integration costs 86 — — 86

Total operating expenses 7,579 2,282,126 (54,337) 2,235,368

Operating income (loss) (7,579) (175,945) 54,361 (129,163)

Other income (expense)

Interest expense and financing costs, net (2,494) (32,971) 128 (35,337)

Debt extinguishment and commitment costs — (6,719) (1,416) (8,135)

Gain on curtailment of pension obligation — 2,032 — 2,032

Other income, net (7) 69 (1) 61

Other income (expense), net (13) 38 — 25

Equity earnings (losses) from subsidiaries (161,082) — 161,082 —

4 unchanged sentences

Adjusted EBITDA $ (6,222) $ (44,518) $ 741 $ (49,999)

________________________________________________________

(1) The income tax benefit (expense) of the Parent Guarantor and Issuer and Subsidiaries is determined using the separate return method.

The Non-Guarantor Subsidiaries and Eliminations column includes tax benefits recognized at the Par consolidated level that are primarily associated with changes to the consolidated valuation allowance and other deferred tax balances.

Three Months Ended March 31, 2020

Six Months Ended June 30, 2020

Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc.

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Impairment expense — 67,922 — 67,922

Gain on sale of assets, net — — — —

General and administrative expense (excluding depreciation) 5,629 16,376 — 22,005

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Interest expense and financing costs, net (2,473) (29,640) (2,975) (35,088)

Other income, net 10 14 — 24

Other income (expense), net 12 467 — 479

Change in value of common stock warrants 4,270 — — 4,270

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The following tables present a reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measure, Net Loss, on a historical basis for the periods indicated (in thousands):

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc.

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RINs loss (gain) in excess of net obligation — 25,207 — 25,207

Unrealized loss on derivatives — 1,404 — 1,404

Acquisition and integration costs (352) — — (352)

Debt extinguishment and commitment costs — 6,628 — 6,628

Loss (gain) on sale of assets, net — 569 (59) 510

Depreciation, depletion, and amortization 618 22,882 48 23,548

Interest expense and financing costs, net 1,204 16,074 (92) 17,186

Equity losses (income) from subsidiaries 104,361 — (104,361) —

Income tax expense (benefit) 17 (28,655) 29,245 607

Adjusted EBITDA (3) $ (3,110) $ (3,588) $ 25 $ (6,673)

Three Months Ended June 30, 2020

Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc.

and Subsidiaries

Net income (loss) $ (40,560) $ (29,442) $ 29,442 $ (40,560)

Inventory valuation adjustment — (35,979) — (35,979)

RINs loss (gain) in excess of net obligation — 10,738 — 10,738

Unrealized loss (gain) on derivatives — (22,431) — (22,431)

Acquisition and integration costs — 90 — 90

Changes in valuation allowance and other deferred tax items (1) — — (2,714) (2,714)

Severance costs 96 — — 96

Depreciation, depletion, and amortization 769 21,229 130 22,128

Interest expense and financing costs, net 1,245 14,610 559 16,414

Equity losses from Laramie Energy, LLC, excluding Par’s share of unrealized loss (gain) on derivatives — — 1,874 1,874

Equity losses (income) from subsidiaries 35,920 — (35,920) —

Income tax expense (benefit) — (7,814) 7,812 (2)

Adjusted EBITDA (3) $ (2,530) $ (48,999) $ 1,183 $ (50,346)

Six Months Ended June 30, 2021

Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc.

and Subsidiaries

Net income (loss) $ (171,185) $ (162,037) $ 162,037 $ (171,185)

Inventory valuation adjustment — 39,459 — 39,459

LIFO liquidation adjustment — 4,151 — 4,151

RINs loss (gain) in excess of net obligation — 53,977 — 53,977

Unrealized loss (gain) on derivatives — (2,608) — (2,608)

Acquisition and integration costs 86 — — 86

Debt extinguishment and commitment costs — 6,719 1,416 8,135

Severance costs — 16 — 16

Gain on sale of assets, net — (11,208) (53,704) (64,912)

Loss (gain) on sale of assets, net — (10,639) (53,763) (64,402)

Depreciation, depletion, and amortization 1,284 45,001 143 46,428

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Adjusted EBITDA (3) $ (6,222) $ (44,518) $ 741 $ (49,999)

Three Months Ended March 31, 2020

Six Months Ended June 30, 2020

Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc.

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(2) Includes impairment losses on our investment in Laramie Energy and our share of Laramie Energy’s asset impairment losses in excess of our basis difference.

These impairment losses and our share of Laramie Energy’s unrealized loss (gain) on derivatives are included in Equity earnings (losses) from Laramie Energy, LLC on our condensed consolidated statements of operations.

(3) For the three months ended March 31, 2021, there was no change in valuation allowance and other deferred tax items, change in value of common stock warrants, impairment of investment in Laramie Energy, unrealized gain on derivatives included in equity earnings from Laramie Energy, impairment expense, or equity losses from Laramie Energy.

For the three months ended March 31, 2020, there was no LIFO liquidation adjustment or loss (gain) on sale of assets.

These impairment losses and our share of Laramie Energy’s unrealized loss (gain)

on derivatives are included in Equity earnings (losses) from Laramie Energy, LLC on our condensed consolidated statements of operations.

(3) For the three and six months ended June 30, 2021, there was no change in valuation allowance and other deferred tax items, change in value of common stock warrants, impairment expense, impairment of investment in Laramie Energy, unrealized gain on derivatives included in equity earnings from Laramie Energy, or equity losses from Laramie Energy.

For the three and six months ended June 30, 2020, there were no debt extinguishment costs, LIFO liquidation adjustment, or loss (gain) on sale of assets.

Liquidity and Capital Resources

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Our primary sources of liquidity are cash flows from operations, cash on hand, amounts available under our credit agreements, and access to capital markets.

Our liquidity position as of March 31, 2021 was $286.9 million and consisted of $282.1 million at Par Petroleum, LLC and subsidiaries, $3.5 million at Par Pacific Holdings, and $1.3 million at all our other subsidiaries.

As of March 31, 2021, we had access to the J.

Aron Deferred Payment Arrangement, the ABL Credit Facility, the MLC receivable advances, and cash on hand of $214.7 million.

In addition, we have the Supply and Offtake Agreements with J.

Our liquidity position as of June 30, 2021 was $243.5 million and consisted of $240.6 million at Par Petroleum, LLC and subsidiaries, $2.8 million at Par Pacific Holdings, and $0.1 million at all our other subsidiaries.

As of June 30, 2021, we had access to the ABL Credit Facility, the MLC receivable advances, and cash on hand of $174.3 million.

Beginning on July 1, 2021, we also had access to the J.

Aron Discretionary Draw Facility.

In addition, we have the Supply and Offtake Agreement with J.

Aron and the Washington Refinery Intermediation Agreement, which are used to finance the majority of the inventory at our Hawaii and Washington refineries, respectively.

Generally, the primary uses of our capital resources have been in the operations of our refining and retail segments, payments related to acquisitions, and to repay or refinance indebtedness.

In the first quarter of 2021, we closed on the sale and leaseback of twenty-two (22) of our retail properties in Hawaii for an aggregate cash purchase price of approximately $112.8 million net of transaction fees (the “Sale-Leaseback Transaction”).

We used approximately $53.1 million of the net cash proceeds to repay the certain financing arrangements which were related to certain of the retail properties and the remainder for general corporate purposes.

On March 19, 2021, we sold 5.75 million shares of common stock in an underwritten public offering at a public offering price of $16.00 per share, resulting in net proceeds of approximately $87.2 million, after deducting underwriting discounts and commissions and offering expenses.

We intend to use the net proceeds from the Equity Offering for general corporate purposes, including repaying indebtedness, capital expenditures, and funding working capital.

We used the net proceeds from the offering of common stock to repay the $48.7 million in remaining aggregate principal amount of 5.00% Convertible Senior Notes and $36.8 million in aggregate principal amount of 12.875% Senior Secured Notes, and the remainder for other general corporate purposes, including capital expenditures and funding working capital.

We believe our cash flows from operations and available capital resources will be sufficient to meet our current capital and turnaround expenditures, working capital, and debt service requirements for the next 12 months.

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We cannot offer any assurances that such capital will be available in sufficient amounts or at an acceptable cost.

We may from time to time seek to retire or repurchase our 5.00% Convertible Senior Notes, our 7.75% Senior Secured Notes, our 12.875% Senior Secured Notes, or our common stock through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions, or otherwise.

We may from time to time seek to retire or repurchase our 7.75% Senior Secured Notes, our 12.875% Senior Secured Notes, or our common stock through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions, or otherwise.

Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors.

The amounts involved may be material.

The following table summarizes cash activities for the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended March 31,

Net cash provided by (used in) operating activities $ (30,737) $ 14,499

The following table summarizes cash activities for the six months ended June 30, 2021 and 2020 (in thousands):

Six Months Ended June 30,

Net cash provided by operating activities $ 1,815 $ 33,767

Net cash provided by (used in) investing activities 88,847 (30,160)

Net cash provided by (used in) financing activities 82,483 (63,491)

Net cash used in operating activities was approximately $30.7 million for the three months ended March 31, 2021, which resulted from a net loss of approximately $62.2 million, offset by net cash provided by changes in operating assets and liabilities of approximately $85.8 million and non-cash earnings from operations of approximately $54.3 million.

The change in our operating assets and liabilities for the three months ended March 31, 2021 was primarily due to a net increase in our Supply and Offtake Agreements and Washington Refinery Intermediation Agreement obligations of $124.4 million and an increase in our gross environmental credit obligations of $109.5 million, partially offset by increases in inventories of $139.1 million and accounts receivable of $45.0 million.

Net cash provided by financing activities 15,358 13,247

Net cash provided by operating activities was approximately $1.8 million for the six months ended June 30, 2021, which resulted from a net loss of $171.2 million, offset by net cash provided by changes in operating assets and liabilities of approximately $191.2 million and non-cash earnings from operations of approximately $18.2 million.

The change in our operating assets and liabilities for the six months ended June 30, 2021 was primarily due to an increase in our gross environmental credit obligations of $204.0 million and a net increase in our Supply and Offtake Agreement and Washington Refinery Intermediation Agreement obligations of $199.6 million, partially offset by increases in inventories of $184.1 million and accounts receivable of $99.5 million.

Net cash provided by changes in operating assets and liabilities also includes an increase of $5.7 million in deferred turnaround costs.

Net cash provided by operating activities was approximately $14.5 million for the three months ended March 31, 2020, which resulted from a net loss of approximately $222.3 million and net cash used for changes in operating assets and liabilities of approximately $88.7 million, offset by non-cash charges to operations of approximately $325.6 million.

For the three months ended March 31, 2021, net cash provided by investing activities was approximately $94.7 million and primarily related to proceeds received from the Sale-Leaseback Transaction.

Net cash used in investing activities was approximately $14.9 million for the three months ended March 31, 2020 and primarily related to additions to property and equipment totaling approximately $14.9 million.

Net cash provided by financing activities for the three months ended March 31, 2021 was approximately $82.5 million, which consisted primarily of proceeds of $87.4 million from our March 2021 Equity Offering and net borrowings associated with the J.

Aron deferred payment and MLC receivable advances of approximately $44.5 million, partially offset by net debt and insurance premium repayments of approximately $47.3 million.

Net cash used in financing activities for the three months ended March 31, 2020 was approximately $63.5 million, which consisted primarily of net debt and insurance premium repayments of approximately $9.8 million and net repayments associated with the J.

Aron deferred payment and MLC receivable advances of approximately $52.1 million.

Net cash provided by operating activities was approximately $33.8 million for the six months ended June 30, 2020, which resulted from a net loss of approximately $262.9 million, partially offset by net cash provided by changes in operating assets and liabilities of approximately $130.9 million and non-cash charges to operations of approximately $165.7 million.

For the six months ended June 30, 2021, net cash provided by investing activities was approximately $88.8 million and primarily related to proceeds received from the Sale-Leaseback Transactions partially offset by $14.0 million of additions to property, plant, and equipment.

Net cash used in investing activities was approximately $30.2 million for the six months ended June 30, 2020 and primarily related to additions to property, plant, and equipment totaling approximately $30.2 million.

Net cash provided by financing activities for the six months ended June 30, 2021 was approximately $15.4 million, which consisted primarily of proceeds of $87.2 million from our March 2021 equity offering of common stock and net borrowings associated with the J.

Aron deferred payment and MLC receivable advances of approximately $76.0 million, partially offset by net debt and insurance premium repayments of approximately $141.3 million and $5.6 million in extinguishment costs related to the repayment of the Retail Property Term Loan and a portion of the 12.875% Senior Secured Notes.

Net cash provided by financing activities for the six months ended June 30, 2020 was approximately $13.2 million, which consisted primarily of net debt and insurance premium borrowings of approximately $92.7 million, partially offset by net repayments associated with the J.

Aron deferred payment and MLC receivable advances of approximately $72.5 million and payments of $6.1 million in deferred loan costs primarily related to the issuance of the 12.875% Senior Secured Notes.

Capital Expenditures and Turnaround Costs

Our deferred turnaround costs and capital expenditures, excluding acquisitions, for the three months ended March 31, 2021 totaled approximately $13.8 million and were primarily related to the 2021 turnaround and related scheduled maintenance work at our Washington refinery and underground tank replacements, rebranding, and point of sale and other equipment upgrades at our Retail segment.

Our deferred turnaround costs and capital expenditures, excluding acquisitions, for the six months ended June 30, 2021 totaled approximately $19.7 million and were primarily related to the 2021 turnaround and related scheduled maintenance work at our Washington refinery, capital projects at our Hawaii refinery, and underground tank replacements, rebranding, and point of sale and other equipment upgrades at our Retail segment.

Our capital expenditure and deferred turnaround cost budget for 2021 ranges from $35 to $45 million and primarily relates to a partial turnaround at our Washington refinery and scheduled sustaining maintenance, regulatory, and safety compliance projects across all businesses.

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Supply and Offtake Agreements.

On June 1, 2015, we entered into the Supply and Offtake Agreements with J.

Aron to support our Hawaii refining operations.

On May 8, 2017, we and J.

Aron amended the Supply and Offtake Agreements and extended the term through May 31, 2021 with a one-year extension option upon mutual agreement of the parties.

On June 1, 2021, we and J.

Aron amended the Supply and Offtake Agreements to increase the amount that we may defer under the deferred payment arrangement.

On December 5, 2018, we and J.

Aron amended the Supply and Offtake Agreements to account for additional processing capacity expected to be provided by the Par West Hawaii refinery.

On May 4, 2021, we extended the term of the Supply and Offtake Agreements to June 30, 2021.

We expect to finalize a new multi-year agreement during the second quarter.

Aron entered into a Second Amended and Restated Supply and Offtake Agreement to support our Hawaii refining operations which expires on May 31, 2024 with a one-year extension option.

Please read Note 7—Inventory Financing Agreements for more information.

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In connection with the consummation of the Washington Acquisition on January 11, 2019, we assumed the Washington Refinery Intermediation Agreement with MLC to support the operations of our Washington refinery.

On November 1, 2019, we and MLC amended the Washington Refinery Intermediation Agreement and extended the term through June 30, 2021, We further amended the Washington Refinery Intermediation Agreement on February 11, 2021 and extended the term through March 31, 2022.

We amended the Washington Refinery Intermediation Agreement on February 11, 2021 to extend the term through March 31, 2022.

Please read Note 7—Inventory Financing Agreements for more information.

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our expectations regarding certain tax liabilities and debt obligations;

our expectations and estimates regarding our Supply and Offtake Agreements and the Washington Refinery Intermediation Agreement;

management’s assumptions about future events;

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These and other forward-looking statements could cause the actual results, performance, or achievements of Par and its subsidiaries to differ materially from any future results, performance, or achievements expressed or implied by such forward-looking statements.

Statements that are not historical fact are forward-

looking statements.

Statements that are not historical fact are forward-looking statements.

Forward-looking statements can be identified by, among other things, the use of forward-looking language, such as the words “plan,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “may,” “will,” “would,” “could,” “should,” “seeks,” or “scheduled to,” or other similar words, or the negative of these terms or other variations of these terms or comparable language, or by discussion of strategy or intentions.

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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-Q

Item 2. Management’s Discussion and Analysis