What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-06 compared with 2021-11-04 · 202 added, 429 removed, 390 unchanged (62% of the section changed)

2 unchanged sentences

Our business is organized into three primary segments:

1) Refining - We own and operate four refineries, including one idled refinery, with total operating throughput capacity of over 150 Mbpd in Hawaii, Wyoming, and Washington.

1) Refining - We own and operate three refineries with total operating throughput capacity of 154 Mbpd in Hawaii, Wyoming, and Washington.

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.

This year, 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 to transport and store crude oil and refined products for our refineries and transport refined products to our retail sites or third-party purchasers.

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

As of March 31, 2022, 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.

Given the improved outlook for natural gas, we are considering strategic alternatives with respect to our investment in Laramie Energy given the improved outlook for natural gas, including, among other things, a change in the size of our investment.

We have four reportable segments:

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Recent Events Affecting Comparability of Periods

During the third quarter of 2021, demand for refined products in the regions in which we operate continued to recover as vaccination rates increased and travel restrictions related to the COVID-19 pandemic eased in the U.S.

On June 10, 2021, the Centers for Disease Control and Prevention (“CDC”) announced that individuals who have been fully vaccinated against COVID-19 can resume domestic travel at low risk to themselves of contracting COVID-19, though the CDC continued to recommend wearing masks and adhering to social distancing guidelines.

Beginning July 8, 2021, the state of Hawaii lifted its requirement for travelers entering the state without a pre-travel test to quarantine for those who had been fully vaccinated in the U.S.

Tourism in Hawaii continued to rise during the third quarter of 2021, with 714 thousand visitors traveling domestically from the U.S.

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

Wyoming has experienced similar economic growth due to a tourism boom, with Mount Rushmore and Devils Tower welcoming 2.2 million and 509 thousand visitors, respectively, during the nine months ending September 30, 2021, both approximately 20% increases from the same period in 2019.

Our refining margins saw improvements during the third quarter of 2021 compared to the second quarter, and profitability in our retail and logistics segments during the nine months ended September 30, 2021, reached over 90% of pre-pandemic levels.

As of September 30, 2021, 56% of the United States population was fully vaccinated, and in Hawaii, Washington, and Wyoming, 58%, 61%, and 42% of the population was fully vaccinated, respectively.

Despite the increases in vaccination rates and domestic travel, economic recovery from the pandemic remains uncertain as the Delta variant, now the dominant coronavirus strain in the U.S., caused a resurgence of COVID-19 in the U.S.

during the third quarter of 2021.

On August 23, 2021, the governor of Hawaii asked travelers to delay all non-essential travel through the end of October due to the recent surge in COVID-19 cases experienced in the state, although there have been no new travel restrictions imposed by the state.

As the COVID-19 pandemic remains a dynamic driver in the global economy, we continue to monitor the spread of COVID-19 and its potential impacts on our business.

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 closed sale-leaseback transactions (the “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 $112.8 million, net of fees.

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 in response to the pandemic and its effects on the economy 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.

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 nine months 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.

During the first quarter of 2022, the global market for energy commodities experienced significant volatility.

In January and February, the price of crude oil maintained the steady increase experienced in the last quarter of 2021 as the global economy continued to recover from lows related to the COVID-19 pandemic and the Organization of the Petroleum Exporting Countries, or OPEC, and its oil-producing allies implemented modest production increases while global demand surged.

The rise in demand was driven by a recovery of U.S.

domestic travel to pre-pandemic levels as COVID-19 cases declined and an improved outlook on international tourism from the Asian market for the remainder of 2022 as international travel restrictions in Japan eased in March.

In March, the U.S.

Centers for Disease Control and Prevention (“CDC”) lifted its Travel Health Notice for cruise ships in response to the decline in COVID-19 cases, and in April, the requirement for passengers to wear masks on airplanes mandated by the CDC was struck down in a U.S.

District Court.

Airline companies, which represent a significant portion of our Hawaii market through jet fuel sales, have forecasted significant increases in air travel volumes for the remainder of 2022, further signifying an expected return to pre-pandemic levels of demand in the Pacific region.

In response to the Russian invasion of Ukraine in February, the international community imposed economic sanctions and other limitations on Russian exports, which further decreased the global supply of crude oil and drove up the price of crude oil.

By early March, crude oil reached its highest price since 2008.

On March 3, 2022, we suspended purchases of Russian crude oil for our Hawaii refinery in response to the Russia-Ukraine conflict.

We have turned to other grades of crude oil to meet fuel production requirements.

As of the date of this Quarterly Report on Form 10-Q, the Russia-Ukraine conflict is ongoing and continues to impact the global economy.

We will continue to monitor the effects the conflict has on the global financial markets and our operations.

Please read Item 1A.

— Risk Factors for more information on the Russia-Ukraine conflict and its potential impacts on our business.

Additionally, the financial results contained in this Quarterly Report on Form 10-Q reflect the continuing COVID-19 pandemic-related demand suppression experienced in the regions in which we operate.

Though vaccine availability and vaccination rates are increasing, the 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 these and other events on our financial condition, future results of operations, and future cash flows and liquidity is uncertain and has been and may continue to be material.

Results of Operations

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

Net Income (Loss).

Our financial results for the third quarter of 2021 improved from a net loss of $14.3 million for the three months ended September 30, 2020 to net income of $81.8 million for the three months ended September 30, 2021.

The increase was primarily driven by higher product crack spreads related to increased refined product demand, favorable RINs expenses driven by lower RINs prices, and a 16% increase in sales volumes in our Refining segment, partially offset by higher feedstock, purchased product, and derivative costs and higher inventory financing costs.

Adjusted EBITDA and Adjusted Net Income (Loss).

For the three months ended September 30, 2021, Adjusted EBITDA was $84.7 million compared to a loss of $16.1 million for the three months ended September 30, 2020.

The increase was primarily related to improved crack spreads driven by increased refined product demand and favorable RINs mark-to-market adjustments driven by lower RINs prices, partially offset by unfavorable feedstock and purchased product costs at our Hawaii and Washington refineries.

For the three months ended September 30, 2021, Adjusted Net Income (Loss) was income of $45.1 million compared to a loss of $56.5 million for the three months ended September 30, 2020.

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

Nine months ended September 30, 2021 compared to the nine months ended September 30, 2020

Our financial results for the nine months ended September 30, 2021 improved from a net loss of $277.2 million for the nine months ended September 30, 2020 to a net loss of $89.4 million for the nine months ended September 30, 2021.

The increase was primarily driven by favorable feedstock, purchased product, and derivative costs at our Hawaii refinery, improved crack spreads driven by increased refined product demand, 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 nine months ended September 30, 2020 with no such impairments in 2021, and a gain of $63.9 million in the nine months ended September 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 in the first half of 2021, the price lag impact associated with certain product sales contracts at our Hawaii refinery, higher inventory financing costs, and a $20.9 million tax benefit recorded in 2020 with no such benefit recorded in 2021.

Three months ended March 31, 2022 compared to the three months ended March 31, 2021

Our financial results declined from a net loss of $62.2 million for the three months ended March 31, 2021 to a net loss of $137.1 million for the three months ended March 31, 2022.

The increase in our net loss was primarily driven by a gain of $63.9 million related to the Sale-Leaseback Transactions and a $2.0 million gain on curtailment of pension obligation in the three months ended March 31, 2021 with no such gains in the 2022 comparable period .

Other factors impacting our results period over period include higher utilities and repair and maintenance costs and higher employee expenses.

Adjusted EBITDA and Adjusted Net Loss.

For the nine months ended September 30, 2021, Adjusted EBITDA was $34.7 million compared to a loss of $52.7 million for the nine months ended September 30, 2020.

The improvement was primarily related to higher average product crack spreads driven by increased refined product demand, favorable feedstock costs at our Hawaii refinery, lower product delivery costs at our Washington refinery, and lower realized derivative costs at our Hawaii refinery, partially offset by higher RINs mark-to-market expenses related to prior year net obligations due to higher RINs prices and the price lag impact associated with certain product sales contracts at our Hawaii refinery.

Other factors impacting our results period over period include a 17% decrease in fuel margins at our Retail segment related to rising crude oil prices.

For the nine months ended September 30, 2021, Adjusted Net Loss was $87.3 million compared to a loss of approximately $174.5 million for the nine months ended September 30, 2020.

For the three months ended March 31, 2022, Adjusted EBITDA was $8.3 million compared to a loss of $34.4 million for the three months ended March 31, 2021.

The improvement was primarily related to favorable crack spreads across all our refineries and lower RINs costs, partially offset by unfavorable feedstock and purchased product costs and higher costs related to our inventory financing agreements.

Other factors impacting our results period over period include realized derivative unfavorability and increased fuel burn costs for the three months ended March 31, 2022.

For the three months ended March 31, 2022, Adjusted Net Loss was $31.4 million compared to $75.4 million for the three months ended March 31, 2021.

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

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

The following tables summarize our consolidated results of operations for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 (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 September 30,

2021 2020 $ Change % Change (1)

Revenues $ 1,310,368 $ 689,981 $ 620,387 90 %

Cost of revenues (excluding depreciation) 1,098,422 585,289 513,133 88 %

Operating expense (excluding depreciation) 78,059 69,458 8,601 12 %

Depreciation, depletion, and amortization 23,618 22,821 797 3 %

Loss on sale of assets, net 2 — 2 NM

General and administrative expense (excluding depreciation) 12,473 9,818 2,655 27 %

Acquisition and integration costs 1 (155) 156 101 %

Total operating expenses 1,212,575 687,231

Operating income 97,793 2,750

Other income (expense)

Interest expense and financing costs, net (15,374) (17,523) 2,149 (12) %

Debt extinguishment and commitment costs (9) — (9) NM

Other income (expense), net (22) 610 (632) (104) %

Total other income (expense), net (15,405) (16,913)

Income (loss) before income taxes 82,388 (14,163)

Income tax expense (586) (108) (478) 443 %

Net income (loss) $ 81,802 $ (14,271)

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(1) NM - Not meaningful

Nine Months Ended September 30,

Three Months Ended March 31,

2022 2021 $ Change % Change (1)

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Depreciation, depletion, and amortization 23,780 22,880 900 4%

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

Gain on sale of assets, net (64,400) — (64,400) NM

Gain on sale of assets, net — (64,912) 64,912 100%

General and administrative expense (excluding depreciation) 15,893 11,885 4,008 34%

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Interest expense and financing costs, net (16,394) (18,151) 1,757 (10)%

Debt extinguishment and commitment costs (8,144) — (8,144) NM

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

Debt extinguishment and commitment costs — (1,507) 1,507 100%

Gain on curtailment of pension obligation — 2,032 (2,032) (100)%

Other income, net 2 61 (59) (97)%

Change in value of common stock warrants — 4,270 (4,270) (100) %

Equity losses from Laramie Energy, LLC — (46,905) 46,905 100 %

Total other income (expense), net (16,392) (17,565)

Loss before income taxes (137,488) (62,227)

Income tax benefit (expense) (1,193) 20,855 (22,048) (106) %

Income tax benefit (expense) 437 — 437 NM

Net loss $ (137,051) $ (62,227)

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(1) NM - Not meaningful

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

The following tables summarize our operating income (loss) by segment for the three months ended March 31, 2022 and 2021 (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 September 30, 2021 Refining Logistics Retail Corporate, Eliminations and Other (1) Total

Revenues $ 1,242,848 $ 46,735 $ 125,910 $ (105,125) $ 1,310,368

Cost of revenues (excluding depreciation) 1,086,074 24,077 93,387 (105,116) 1,098,422

Operating expense (excluding depreciation) 55,613 3,754 18,692 — 78,059

Depreciation, depletion, and amortization 14,748 5,545 2,630 695 23,618

Loss on sale of assets, net — 2 — — 2

General and administrative expense (excluding depreciation) — — — 12,473 12,473

Acquisition and integration costs — — — 1 1

Operating income (loss) $ 86,413 $ 13,357 $ 11,201 $ (13,178) $ 97,793

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

Revenues $ 626,426 $ 41,722 $ 91,736 $ (69,903) $ 689,981

Cost of revenues (excluding depreciation) 568,051 26,411 60,725 (69,898) 585,289

Operating expense (excluding depreciation) 49,972 3,364 16,122 — 69,458

Depreciation, depletion, and amortization 13,509 5,513 2,829 970 22,821

General and administrative expense (excluding depreciation) — — — 9,818 9,818

Acquisition and integration costs — — — (155) (155)

Operating income (loss) $ (5,106) $ 6,434 $ 12,060 $ (10,638) $ 2,750

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(1) Includes eliminations of intersegment Revenues and Cost of revenues (excluding depreciation) of $105.1 million and $69.9 million for the three months ended September 30, 2021 and 2020, respectively.

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

Three months ended March 31, 2022 Refining Logistics Retail Corporate, Eliminations and Other (1) Total

Revenues $ 1,299,223 $ 42,461 $ 119,909 $ (111,300) $ 1,350,293

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Depreciation, depletion, and amortization 15,333 5,087 2,691 669 23,780

Gain on sale of assets, net (19,595) (19) (44,786) — (64,400)

General and administrative expense (excluding depreciation) — — — 15,893 15,893

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Operating income (loss) $ (118,325) $ 9,852 $ 4,045 $ (16,668) $ (121,096)

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

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

Revenues $ 838,755 $ 41,309 $ 91,188 $ (82,572) $ 888,680

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Depreciation, depletion, and amortization 14,064 5,254 2,660 902 22,880

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

Loss (gain) on sale of assets, net (21,259) — (43,653) — (64,912)

General and administrative expense (excluding depreciation) — — — 11,885 11,885

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________________________________________________________

(1) Includes eliminations of intersegment Revenues and Cost of revenues (excluding depreciation) of $293.2 million and $237.7 million for the nine months ended September 30, 2021 and 2020, respectively.

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

(1) Includes eliminations of intersegment Revenues and Cost of revenues (excluding depreciation) of $111.3 million and $82.6 million for the three months ended March 31, 2022 and 2021, respectively.

Below is a summary of key operating statistics for the refining segment for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

Total Refining Segment

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Refined product sales volume (Mbpd) 122.3 130.0

Hawaii Refineries

Combined Feedstocks Throughput (Mbpd) 81.0 51.2 82.0 70.9

Par East Throughput (Mbpd) 81.0 51.2 82.0 62.5

Par West Throughput (Mbpd) — — — 8.4

Hawaii Refinery

Feedstocks Throughput (Mbpd) 82.7 81.2

Yield (% of total throughput)

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DD&A per bbl ($/throughput bbl) 3.29 1.77

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Wyoming Refinery

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Wyoming 3-2-1 Index (5) 26.53 20.97

Crude Oil Prices ($ per barrel)

Crude Oil Prices (average $ per barrel)

Brent $ 97.90 $ 61.32

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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) 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 and nine months ended September 30, 2021 and 2020:

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Below is a summary of key operating statistics for the retail segment for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

Retail Segment

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Management uses certain financial measures to evaluate our operating performance that are considered non-GAAP financial measures.

These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP and our calculations thereof may not be comparable to similarly titled measures reported by other companies.

These measures should not be considered in isolation or as substitutes or alternatives to their most directly comparable GAAP financial measures or any other measure of financial performance or liquidity presented in accordance with GAAP.

These non-GAAP measures may not be comparable to similarly titled measures used by other companies since each company may define these terms differently.

We believe Adjusted Gross Margin (as defined below) provides useful information to investors because it eliminates the gross impact of volatile commodity prices and adjusts for certain non-cash items and timing differences created by our inventory financing agreements and lower of cost and net realizable value adjustments to demonstrate the earnings potential of the business before other fixed and variable costs, which are reported separately in Operating expense (excluding depreciation) and Depreciation, depletion, and amortization.

Management uses Adjusted Gross Margin per barrel to evaluate operating performance and compare profitability to other companies in the industry and to industry benchmarks.

We believe Adjusted Net Income (Loss) and Adjusted EBITDA (as defined below) are useful supplemental financial measures that allow investors to assess the financial performance of our assets without regard to financing methods, capital structure, or historical cost basis, the ability of our assets to generate cash to pay interest on our indebtedness, and our operating performance and return on invested capital as compared to other companies without regard to financing methods and capital structure.

Beginning with financial results reported for periods in fiscal year 2022, the inventory valuation adjustment was modified to include the first-in, first-out (“FIFO”) inventory gains (losses) associated with the our titled manufactured inventory in Hawaii.

This modification was made to better align Adjusted Net Income (Loss) and Adjusted EBITDA with the cash flow of the Hawaii refining business.

Prior to 2022, the impacts of FIFO inventory gains (losses) associated with Hawaii titled manufactured inventory were eliminated through the inventory valuation adjustment.

We have recast Adjusted Gross Margin, Adjusted Net Income, and Adjusted EBITDA for prior periods when reported to conform to the modified presentation.

Adjusted Gross Margin

Adjusted Gross Margin is defined as (i) operating income (loss) adjusted for operating expense (excluding depreciation);

Adjusted Gross Margin is defined as operating income (loss) excluding:

• operating expense (excluding depreciation);

• depreciation, depletion, and amortization (“DD&A”);

• impairment expense;

loss (gain) on sale of assets;

• loss (gain) on sale of assets, net;

• 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;

beginning in 2022, this also includes the FIFO inventory (gains) losses associated with our titled manufactured inventory in Hawaii);

• LIFO layer liquidation impacts associated with our Washington inventory;

• Renewable Identification Numbers (“RINs”) loss (gain) in excess of net obligation (which represents the income statement effect of reflecting our RINs liability on a net basis);

and unrealized loss (gain) on derivatives or (ii) revenues less cost of revenues (excluding depreciation) plus inventory valuation adjustment, unrealized loss (gain) on derivatives, LIFO layer liquidation impacts associated with our Washington inventory, 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.

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

Management believes Adjusted Gross Margin provides useful information to investors because it eliminates the gross impact of volatile commodity prices and adjusts for certain non-cash items and timing differences created by our inventory financing agreements and lower of cost and net realizable value adjustments to demonstrate the earnings potential of the business before other fixed and variable costs, which are reported separately in Operating expense (excluding depreciation) and Depreciation, depletion, and amortization.

Adjusted Gross Margin should not be considered an alternative to operating income (loss), cash flows from operating activities, or any other measure of financial performance or liquidity presented in accordance with GAAP.

Adjusted Gross Margin presented by other companies may not be comparable to our presentation since each company may define this term differently as they may include other manufacturing costs and depreciation expense in cost of revenues.

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

Three months ended September 30, 2021 Refining Logistics Retail

Operating income $ 86,413 $ 13,357 $ 11,201

Operating expense (excluding depreciation)

55,613 3,754 18,692

Depreciation, depletion, and amortization 14,748 5,545 2,630

Loss on sale of assets, net — 2 —

Inventory valuation adjustment (727) — —

LIFO liquidation adjustment (4,151) — —

RINs gain in excess of net obligation (42,103) — —

Unrealized loss on derivatives 10,228 — —

Adjusted Gross Margin (1) $ 120,021 $ 22,658 $ 32,523

Three months ended September 30, 2020 Refining Logistics Retail

Operating income (loss) $ (5,106) $ 6,434 $ 12,060

Operating expense (excluding depreciation)

49,972 3,364 16,122

Depreciation, depletion, and amortization 13,509 5,513 2,829

• unrealized loss (gain) on derivatives.

Adjusted Gross Margin can also be defined as revenues less cost of revenues (excluding depreciation) excluding:

• inventory valuation adjustment;

LIFO liquidation adjustment 6,211 — —

RINs loss in excess of net obligation 645 — —

Unrealized gain on derivatives (4,952) — —

Adjusted Gross Margin (1) (2) $ 16,299 $ 15,311 $ 31,011

Nine months ended September 30, 2021 Refining Logistics Retail

• unrealized loss (gain) on derivatives;

• LIFO layer liquidation impacts associated with our Washington inventory;

• 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,

• certain hydrocarbon fees and taxes, and

• the unrealized gain (loss) on derivatives and the inventory valuation adjustment that we exclude from Adjusted Gross Margin.

Three months ended March 31, 2022 Refining Logistics Retail

Operating income (loss) $ (118,325) $ 9,852 $ 4,045

2 unchanged sentences

Depreciation, depletion, and amortization 15,333 5,087 2,691

Gain on sale of assets, net (19,595) (19) (44,786)

Inventory valuation adjustment 80,653 — —

2 unchanged sentences

Adjusted Gross Margin (1) $ 58,669 $ 18,712 $ 26,067

Nine months ended September 30, 2020 Refining Logistics Retail

Three months ended March 31, 2021 Refining Logistics Retail

Operating income (loss) $ (90,865) $ 10,077 $ 49,355

2 unchanged sentences

Depreciation, depletion, and amortization 14,064 5,254 2,660

Impairment expense 38,105 — 29,817

Loss on sale of assets, net (21,259) — (43,653)

Inventory valuation adjustment 23,086 — —

4 unchanged sentences

____________________________________________________________________________

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

(2) For the three and nine months ended September 30, 2020, there was no loss (gain) on sale of assets recorded in Operating income (loss).

(3) For the nine months ended September 30, 2021, there was no LIFO liquidation adjustment recorded in Operating income (loss).

(1) For the three months ended March 31, 2022, there was no loss (gain) on sale of assets, impairment expense, or LIFO liquidation adjustment recorded in Operating income (loss).

(2) For the three months ended March 31, 2021, there was no impairment expense recorded in Operating income (loss).

Adjusted Net Income (Loss) and Adjusted EBITDA

Adjusted Net Income (Loss) is defined as Net income (loss) excluding 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), the LIFO layer liquidation impacts associated with our Washington inventory, RINs loss (gain) in excess of net obligation, unrealized (gain) loss on derivatives, acquisition and integration costs, debt extinguishment and commitment costs, increase in (release of) tax valuation allowance and other deferred tax items, changes in the value of contingent consideration and common stock warrants, severance costs, (gain) loss on sale of assets, impairment expense, 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, and Par’s share of Laramie Energy’s unrealized loss (gain) on derivatives.

Adjusted EBITDA is Adjusted Net Income (Loss) excluding DD&A, interest expense and financing costs, 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, and income tax expense (benefit).

We believe Adjusted Net Income (Loss) and Adjusted EBITDA are useful supplemental financial measures that allow investors to assess:

• The financial performance of our assets without regard to financing methods, capital structure, or historical cost basis;

• The ability of our assets to generate cash to pay interest on our indebtedness;

• Our operating performance and return on invested capital as compared to other companies without regard to financing methods and capital structure.

Adjusted Net Income (Loss) and Adjusted EBITDA should not be considered in isolation or as a substitute for operating income (loss), net income (loss), cash flows provided by operating, investing, and financing activities, or other income or cash flow statement data prepared in accordance with GAAP.

Adjusted Net Income (Loss) and Adjusted EBITDA presented by other companies may not be comparable to our presentation as other companies may define these terms differently.

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Net Income (Loss) $ 81,802 $ (14,271) $ (89,383) $ (277,168)

Adjusted Net Income (Loss) is defined as Net income (loss) excluding:

beginning in 2022, this also includes the FIFO inventory (gains) losses associated with our titled manufactured inventory in Hawaii);

• the LIFO layer liquidation impacts associated with our Washington inventory;

• RINs loss (gain) in excess of net obligation;

• unrealized (gain) loss on derivatives;

• acquisition and integration costs;

• debt extinguishment and commitment costs;

• increase in (release of) tax valuation allowance and other deferred tax items;

• changes in the value of contingent consideration and common stock warrants;

• severance costs;

• (gain) loss on sale of assets;

• impairment expense, 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;

• Par’s share of Laramie Energy’s unrealized loss (gain) on derivatives.

Adjusted EBITDA is defined as Adjusted Net Income (Loss) excluding:

• interest expense and financing costs;

• 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;

• income tax expense (benefit).

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,

Net Loss $ (137,051) $ (62,227)

Inventory valuation adjustment 80,653 23,086

LIFO liquidation adjustment — 1,888

RINs loss (gain) in excess of net obligation (42,103) 645 11,874 17,985

RINs loss in excess of net obligation 7,256 28,770

Unrealized loss (gain) on derivatives 15,452 (4,012)

1 unchanged sentence

Debt extinguishment and commitment costs — 1,507

Changes in valuation allowance and other deferred tax items (1) — — — (21,087)

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

Severance costs 2,228 16

Loss (gain) on sale of assets, net — (64,912)

Impairment expense — — — 67,922

Impairment of Investment in Laramie Energy, LLC (2) — — — 45,294

Par's share of Laramie Energy's unrealized gain on derivatives (2) — — — (1,110)

Adjusted Net Income (Loss) (3) 45,120 (56,502) (87,251) (174,520)

Adjusted Net Loss (1) (31,399) (75,446)

Depreciation, depletion, and amortization 23,780 22,880

Interest expense and financing costs, net 16,394 18,151

Equity losses from Laramie Energy, LLC, excluding Par’s share of unrealized gain on derivatives and impairment losses — — — 2,721

Income tax expense 586 108 1,193 232

Income tax expense (benefit) (437) —

Adjusted EBITDA $ 8,338 $ (34,415)

________________________________________

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

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

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

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

(1) For the three months ended March 31, 2022 and 2021, there was no change in value of contingent consideration, change in value of common stock warrants, change in valuation allowance or other deferred tax items, impairment expense, or equity losses (earnings) from Laramie Energy, LLC, including impairments associated with our investment in Laramie Energy, our share of Laramie Energy’s asset impairment losses in excess of our basis difference, and our share of Laramie Energy’s unrealized loss (gain) on derivatives.

Factors Impacting Segment Results

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

Operating income for our refining segment was $86.4 million for the three months ended September 30, 2021, an increase of $91.5 million compared to operating loss of $5.1 million for the three months ended September 30, 2020.

The increase in profitability was primarily driven by an increase in product crack spreads driven by increased refined product demand, a $74.0 million favorable reduction in RINs expenses driven by lower RINs prices, and a 16% increase in sales volume resulting from increasing demand due to the continued economic recovery, partially offset by unfavorable changes in feedstock costs at our Hawaii and Washington refineries.

Other factors impacting our results period over period include higher purchased product costs at our Hawaii refinery, and higher derivatives and inventory financing costs.

Operating income for our logistics segment was $13.4 million for the three months ended September 30, 2021, an increase of $7.0 million compared to operating income of $6.4 million for the three months ended September 30, 2020.

The increase is due to a net 38% higher throughput across our Hawaii assets and 35% higher throughput across our Wyoming logistics assets related to increased sales volumes primarily due to increased demand as COVID-19 restrictions ease.

Operating income for our retail segment was $11.2 million for the three months ended September 30, 2021, a decrease of $0.9 million compared to operating income of $12.1 million for the three months ended September 30, 2020.

The decrease was primarily due to a 4% decrease in fuel margins related to rising crude oil prices and additional rent expense in the third quarter of 2021 related to the Sale-Leaseback Transactions we closed on February 23 and March 12, 2021, partially offset by an 11% increase in fuel sales volumes.

Nine months ended September 30, 2021 compared to the nine months ended September 30, 2020

Operating loss for our refining segment was $103.6 million for the nine months ended September 30, 2021, an improvement of $106.8 million compared to an operating loss of $210.4 million for the nine months ended September 30, 2020.

The improvement was primarily driven by lower purchased product and feedstock costs, higher average product crack spreads, and lower derivative costs, partially offset by a $54.4 million increase in RINs expenses driven by higher RINs prices in the first half of 2021 and higher costs associated with our inventory financing.

Other factors impacting our results period over period include no impairment in 2021 as compared to our 2020 goodwill impairment of $38.1 million, and a 2021 gain on sale of assets 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 $38.0 million for the nine months ended September 30, 2021, an increase of $6.5 million compared to operating income of $31.5 million for the nine months ended September 30, 2020.

The increase was primarily related to a net 12% higher throughput across our Hawaii assets and 15% higher throughput across our Wyoming logistics assets related to increased sales volumes, primarily due to increased demand as COVID-19 restrictions ease.

Operating income for our retail segment was $73.2 million for the nine months ended September 30, 2021, an increase of $63.1 million compared to an operating income of $10.1 million for the nine months ended September 30, 2020.

The increase in profitability is primarily due to a gain on sale of assets 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 7%, partially offset by a decrease in fuel margins of 17% related to rising crude oil prices.

Three months ended March 31, 2022 compared to the three months ended March 31, 2021

Operating loss for our refining segment was $118.3 million for the three months ended March 31, 2022, an increased loss of $27.4 million compared to an operating loss of $90.9 million for the three months ended March 31, 2021.

The increased loss was primarily driven by higher costs associated with our inventory financing agreements, higher feedstock costs across our refineries, and unfavorable purchased product and derivative costs at our Hawaii refinery, partially offset by favorable crack spreads across our refineries and a $67.9 million decrease in RINs expenses.

Other factors impacting our results period over period include a gain on sale of assets of $21.3 million in the three months ended March 31, 2021 primarily related to the Sale-Leaseback Transactions we closed in the first quarter of 2021 with no such gain in 2022 and increased fuel burn costs for the three months ended March 31, 2022.

Operating income for our logistics segment was $9.9 million for the three months ended March 31, 2022, which was relatively consistent with operating income of $10.1 million for the three months ended March 31, 2021.

Operating income for our retail segment was $4.0 million for the three months ended March 31, 2022, a decrease of $45.4 million compared to an operating income of $49.4 million for the three months ended March 31, 2021.

The decrease in profitability is primarily due to a gain on sale of assets of $43.7 million in the three months ended March 31, 2021 primarily related to the Sale-Leaseback Transactions we closed in the first quarter of 2021 with no such gain in 2022.

Adjusted Gross Margin

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

For the three months ended September 30, 2021, our refining Adjusted Gross Margin was $120.0 million, an increase of $103.7 million compared to $16.3 million for the three months ended September 30, 2020.

The increase was primarily driven by improved crack spreads, a decrease in RINs expenses driven by lower RINs prices, and a 16% increase in refining sales volumes, partially offset by higher feedstock costs, additional purchased product costs at our Hawaii refinery and unfavorable realized derivative expenses.

Adjusted Gross Margin for the Hawaii refineries increased from a loss of $0.47 per barrel during the three months ended September 30, 2020 to income of $7.66 per barrel during the three months ended September 30, 2021 primarily due to improved contract terms and crack spreads, a 24% increase in sales volume, and decreased RINs costs driven by a $19.2 million favorable change in RINs mark-to-market adjustments, partially offset by unfavorable feedstock costs, higher purchased product expenses and unfavorable increases in logistics costs.

Adjusted Gross Margin for the Wyoming refinery increased $18.87 per barrel primarily due to improved crack spreads, decreased RINs costs driven by a $10.1 million favorable change in RINs mark-to-market adjustments, and a 36% increase in sales volumes.

Adjusted Gross Margin for the Washington refinery increased $2.81 per barrel primarily due to improved crack spreads and a $6.3 million favorable change in RINs mark-to-market adjustments, partially offset by unfavorable feedstock costs and a 3% decrease in sales volume.

For the three months ended September 30, 2021, our logistics Adjusted Gross Margin was $22.7 million, an increase of $7.4 million compared to $15.3 million for the three months ended September 30, 2020.

The increase is primarily due to net 38% higher throughput across our Hawaii logistics assets and 35% higher throughput across our Wyoming logistics assets due to increased sales volumes in both regions driven by easing travel restrictions related to the continued recovery from the COVID-19 pandemic.

For the three months ended September 30, 2021, our retail Adjusted Gross Margin was $32.5 million, which was relatively consistent with our Adjusted Gross Margin of $31.0 million for the three months ended September 30, 2020.

The increase was primarily due to a 11% increase in sales volumes from the ongoing recovery partially offset by a 4% decrease in fuel margins related to rising crude oil prices.

Nine months ended September 30, 2021 compared to the nine months ended September 30, 2020

For the nine months ended September 30, 2021, our refining Adjusted Gross Margin was $135.3 million, an increase of $101.8 million compared to $33.5 million for the nine months ended September 30, 2020.

The increase was primarily due to favorable purchased product costs, improved crack spreads, lower feedstock costs, and realized derivatives favorability, partially offset by higher RINs expense driven by increasing RINs prices.

Adjusted Gross Margin for the Hawaii refineries improved from a loss of $2.17 per barrel during the nine months ended September 30, 2020 to income of $2.52 per barrel during the nine months ended September 30, 2021 primarily due to favorable purchased product and feedstock costs and realized derivative favorability, partially offset by unfavorable crack spreads, increased RINs costs driven by a $20.6 million higher RINs mark-to-market expense, a 3% decrease in sales volumes, and the price lag impact associated with certain sales contracts.

Adjusted Gross Margin for the Wyoming refinery increased $9.82 per barrel primarily due to improved crack spreads, a favorable FIFO change of $22.2 million in 2021 compared to 2020, and a 15% increase in sales volumes, partially offset by increased RINs costs driven by a $3.9 million higher RINs mark-to-market expense.

Adjusted Gross Margin for the Washington refinery decreased $3.99 per barrel primarily due to higher feedstock costs and a $5.8 million increase in RINs mark-to-market expense, partially offset by improving crack spreads and lower logistics costs.

For the nine months ended September 30, 2021, our logistics Adjusted Gross Margin was $65.3 million, an increase of $7.8 million compared to $57.5 million for the nine months ended September 30, 2020.

The increase is primarily due to net 12% higher throughput across our Hawaii logistics assets and 15% higher throughput across our Wyoming logistics assets due to increased sales volumes driven by easing travel restrictions related to the continued recovery from the COVID-19 pandemic.

For the nine months ended September 30, 2021, our retail Adjusted Gross Margin was $89.6 million, a decrease of $7.0 million compared to $96.6 million for the nine months ended September 30, 2020.

The decrease was primarily due to a 17% decrease in fuel margins related to rising crude oil prices, partially offset by a 7% increase in sales volumes from the ongoing recovery.

Three months ended March 31, 2022 compared to the three months ended March 31, 2021

For the three months ended March 31, 2022, our refining Adjusted Gross Margin was $58.7 million, an increase of $53.7 million compared to $5.0 million for the three months ended March 31, 2021.

The increase was primarily due to favorable crack spreads across all our refineries and lower RINs costs, partially offset by unfavorable feedstock and purchased product costs, higher costs associated with our inventory financing agreements, and higher fuel burn costs.

Adjusted Gross Margin for the Hawaii refinery improved from $0.76 per barrel during the three months ended March 31, 2021 to $3.27 per barrel during the three months ended March 31, 2022 primarily due to favorable crack spreads and decreased RINs costs, partially offset by unfavorable feedstock, purchased product, and realized derivative costs, increased fuel burn costs, and higher costs associated with our inventory financing agreement.

Adjusted Gross Margin for the Wyoming refinery increased by $22.56 per barrel primarily due to decreased RINs costs, a favorable FIFO change of $9.8 million, improved crack spreads, and higher sales volumes.

Adjusted Gross Margin for the Washington refinery increased by $2.07 per barrel primarily due to favorable crack spreads and decreased RINs costs, partially offset by unfavorable feedstock costs, reduced sales volumes related to the 2022 turnaround, and higher costs associated with our inventory financing agreement.

For the three months ended March 31, 2022, our logistics Adjusted Gross Margin was $18.7 million, which was relatively consistent with $19.2 million for the three months ended March 31, 2021.

For the three months ended March 31, 2022, our retail Adjusted Gross Margin was $26.1 million, which was relatively consistent with $25.3 million for the three months ended March 31, 2021.

Discussion of Consolidated Results

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

For the three months ended September 30, 2021, revenues were $1.3 billion, a $0.6 billion increase compared to $0.7 billion for the three months ended September 30, 2020.

The increase was primarily due to an increase of $0.6 billion in third-party refining segment revenue as a result of increases in Brent and WTI crude oil prices, a 16% increase in refining sales volumes, and an increase in average product cracks.

Brent crude oil prices recovered to $73.23 per barrel during the third quarter of 2021 compared to $43.34 per barrel during the third quarter of 2020, and WTI crude oil prices recovered to $70.52 per barrel during the third quarter of 2021 compared to $40.92 per barrel during the third quarter of 2020.

Cost of Revenues (Excluding Depreciation).

For the three months ended September 30, 2021, cost of revenues (excluding depreciation) was $1.1 billion, a $0.5 billion increase compared to $0.6 billion for the three months ended September 30, 2020.

The increase was primarily driven by higher Brent and WTI crude oil prices, higher refining volumes as discussed above, and unfavorable feedstock differentials at our Hawaii and Washington refineries, partially offset by a $74.0 million favorable change in the RINs expense driven by lower RINs prices.

Operating Expense (Excluding Depreciation).

For the three months ended September 30, 2021, operating expense (excluding depreciation) was $78.1 million, an $8.6 million increase when compared to $69.5 million for the three months ended September 30, 2020.

The increase in operating expenses was primarily driven by higher maintenance and utility costs at our Hawaii refinery and increased rent expenses driven by new leases from the Sale-Leaseback Transactions we completed in the first quarter of 2021.

Depreciation, Depletion, and Amortization .

For the three months ended September 30, 2021, DD&A was $23.6 million, which was relatively consistent with $22.8 million for the three months ended September 30, 2020.

General and Administrative Expense (Excluding Depreciation).

For the three months ended September 30, 2021, general and administrative expense (excluding depreciation) was $12.5 million, an increase of $2.7 million compared to $9.8 million for the three months ended September 30, 2020.

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

Interest Expense and Financing Costs, Net .

For the three months ended September 30, 2021, our interest expense and financing costs were $15.4 million, a decrease of $2.1 million compared to $17.5 million for the three months ended September

The decrease was primarily due to lower outstanding debt balances driven by the early repayment of a portion of the outstanding 12.875% Senior Secured Notes on June 14, 2021, and the final maturity of the 5.00% Convertible Senior Notes on June 15, 2021.

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

Income Taxes.

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

For the three months ended September 30, 2020, we recorded an income tax expense of $0.1 million primarily related to current state income taxes.

Nine months ended September 30, 2021 compared to the nine months ended September 30, 2020

For the nine months ended September 30, 2021, revenues were $3.4 billion, a $1.0 billion increase compared to $2.4 billion for the nine months ended September 30, 2020.

The increase was primarily due to an increase of $0.9 billion in third-party revenues at our refining segment primarily as a result of higher crude oil prices across all our refining locations and a 15% increase in refining sales volume at our Wyoming refinery combined with improved realized product differentials in that region.

Other factors impacting revenues were a 3% decrease in sales volumes and unfavorable product pricing in Hawaii, partially offset by more favorable product pricing at our Washington refinery.

Average Brent crude oil prices recovered to $67.92 in the nine months ended September 30, 2021 compared to $42.52 per barrel in the nine months ended September 30, 2020, and WTI crude oil prices recovered to $64.99 per barrel during the nine months ended September 30, 2021 compared to $38.31 in the nine months ended September 30, 2020.

Revenues at our retail segment increased $61.3 million primarily due to a 18% increase in fuel prices and a 7% increase in sales volumes.

Three months ended March 31, 2022 compared to the three months ended March 31, 2021

For the three months ended March 31, 2022, revenues were $1.4 billion, a $0.5 billion increase compared to $0.9 billion for the three months ended March 31, 2021.

The increase was primarily due to an increase of $0.4 billion in third-party revenues at our refining segment, primarily related to higher crude oil prices and crack spreads across our refining locations, partially offset by a 25% decrease in refining sales volume at our Washington refinery, mainly due to the 2022 turnaround.

Average Brent crude oil prices rose to $97.90 in the three months ended March 31, 2022 compared to $61.32 per barrel in the three months ended March 31, 2021, and WTI crude oil prices rose to $95.01 per barrel during the three months ended March 31, 2022 compared to $58.14 in the three months ended March 31, 2021.

Revenues at our retail segment increased $28.7 million primarily due to a 42% increase in fuel prices.

Cost of Revenues (Excluding Depreciation).

For the nine months ended September 30, 2021, cost of revenues (excluding depreciation) was $3.2 billion, a $1.0 billion increase compared to $2.2 billion for the nine months ended September 30, 2020.

The increase was primarily due to increases in Brent and WTI crude oil prices as discussed above, higher inventory financing costs, and a $54.4 million increase in the RINs expense driven by higher RINs prices during 2021, partially offset by favorable purchased product and feedstock costs at our Hawaii refinery.

Other factors impacting our results period over period include 37% higher fuel costs and 7% higher sales volumes at our Retail segment.

For the three months ended March 31, 2022, cost of revenues (excluding depreciation) was $1.4 billion, a $0.5 billion increase compared to $0.9 billion for the three months ended March 31, 2021.

The increase was primarily due to increases in Brent and WTI crude oil prices as discussed above, higher feedstock, purchased product, and derivative costs, and higher costs associated with our inventory financing agreements, partially offset by a $67.9

million decrease in RINs expense across our refineries.

Other factors impacting our results period over period include 56% higher fuel costs at our retail segment.

Operating Expense (Excluding Depreciation).

For the nine months ended September 30, 2021, operating expense (excluding depreciation) was $221.1 million, an increase of $11.2 million when compared to $209.9 million for the nine months ended September 30, 2020.

The increase was primarily driven by higher utility and maintenance expenses at our Hawaii refinery, increased rent expenses driven by new leases from the Sale-Leaseback Transactions we completed in the first quarter of 2021, and increased utility and maintenance expenses at our Wyoming refinery related to Winter Storm Uri in February 2021.

For the three months ended March 31, 2022, operating expense (excluding depreciation) was $81.4 million, an increase of $7.2 million when compared to $74.2 million for the three months ended March 31, 2021.

The increase was primarily driven by higher utility and maintenance expenses at our Hawaii and Washington refineries and higher maintenance and rental expenses at our Hawaii retail locations.

Depreciation, Depletion, and Amortization .

For the nine months ended September 30, 2021, DD&A was $70.0 million, an increase of $3.8 million compared to $66.2 million for the nine months ended September 30, 2020.

The increase was primarily due to Hawaii refinery turnaround amortization.

Impairment Expense.

For the nine months ended September 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 nine months ended September 30, 2021.

For the three months ended March 31, 2022, DD&A was $23.8 million, which was relatively consistent with $22.9 million for the three months ended March 31, 2021.

Gain on Sale of Assets, Net.

For the nine months ended September 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 nine months ended September 30, 2020.

For the three months ended March 31, 2022, there was no gain on sale of assets, net.

For the three months ended March 31, 2021, the gain on sale of assets, net was approximately $64.9 million and primarily related to the Sale-Leaseback Transactions we closed in the first quarter of 2021.

General and Administrative Expense (Excluding Depreciation).

For the nine months ended September 30, 2021, general and administrative expense (excluding depreciation) was $36.6 million, an increase of $4.8 million compared to $31.8 million for the nine months ended September 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 nine months ended September 30, 2021, acquisition and integration costs were not significant.

For the nine months ended September 30, 2020, we incurred $0.6 million of integration costs primarily related to the Washington Acquisition.

For the three months ended March 31, 2022, general and administrative expense (excluding depreciation) was $15.9 million, an increase of $4.0 million compared to $11.9 million for the three months ended March 31, 2021.

The increase was primarily due to higher employee costs.

Interest Expense and Financing Costs, Net .

For the nine months ended September 30, 2021, our interest expense and financing costs were $50.7 million, a decrease of $1.9 million when compared to $52.6 million for the nine months ended

September 30, 2020.

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

For the three months ended March 31, 2022, our interest expense and financing costs were $16.4 million, a decrease of $1.8 million when compared to $18.2 million for the three months ended March 31, 2021.

The decrease was primarily due to lower outstanding debt balances in 2022 driven by the early partial repayment of the outstanding 12.875% Senior Secured Notes and the full repayment at maturity of the 5.00% Convertible Senior Notes in June 2021, partially offset by higher fees related to our inventory financing.

Debt Extinguishment and Commitment Costs.

For the nine months ended September 30, 2021, our debt extinguishment and commitment costs were $8.1 million and primarily represent $6.6 million in extinguishment costs associated with the early repayment of a portion of the outstanding 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 nine months ended September 30, 2020.

For the three months ended March 31, 2021, our debt extinguishment and commitment costs were $1.5 million and primarily represent $1.4 million in extinguishment costs associated with the repayment of the Retail Property Term Loan on February 23, 2021.

No such costs were incurred for the three months ended March 31, 2022.

Gain on Curtailment of Pension Obligation.

For the nine months ended September 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 nine months ended September 30, 2020.

Change in Value of Common Stock Warrants .

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

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

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

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

During the nine months ended September 30, 2021, there were no common stock warrants outstanding.

Equity Losses from Laramie Energy, LLC .

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

For the three months ended March 31, 2021, we recorded a $2.0 million gain on curtailment of pension obligation related to the March 2021 Wyoming Refining plan amendment.

No such gain was recorded during the three months ended March 31, 2022.

Income Taxes.

For the nine months ended September 30, 2021, we recorded an income tax expense of $1.2 million primarily driven by foreign taxes.

For the nine months ended September 30, 2020, we recorded an income tax benefit of $20.9 million primarily driven by an increase in our net operating loss carryforwards and the change in our indefinitely-lived goodwill due to the impairments.

For the three months ended March 31, 2022, we recorded an income tax benefit of $0.4 million primarily related to an increase in our net operating loss carryforwards.

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

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 September 30, 2021

As of March 31, 2022

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

78 unchanged sentences

Long-term debt, net of current maturities — 553,717 — 553,717

Common stock warrants — — — —

Finance lease liabilities 17 12,192 (4,518) 7,691

11 unchanged sentences

Total liabilities and stockholders’ equity $ 331,909 $ 2,538,699 $ (300,357) $ 2,570,251

Three Months Ended September 30, 2021

Three Months Ended March 31, 2022

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

12 unchanged sentences

Interest expense and financing costs, net (5) (16,483) 94 (16,394)

Debt extinguishment and commitment costs — (9) — (9)

Other income (expense), net (7) 9 — 2

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Adjusted EBITDA $ (3,834) $ 12,159 $ 13 $ 8,338

Three Months Ended September 30, 2020

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

and Subsidiaries

Revenues $ — $ 689,981 $ — $ 689,981

Operating expenses

Cost of revenues (excluding depreciation) — 585,289 — 585,289

Operating expense (excluding depreciation) — 70,641 (1,183) 69,458

Depreciation, depletion, and amortization 753 21,941 127 22,821

General and administrative expense (excluding depreciation) 2,561 7,257 — 9,818

Acquisition and integration costs — (155) — (155)

Total operating expenses 3,314 684,973 (1,056) 687,231

Operating income (loss) (3,314) 5,008 1,056 2,750

Other income (expense)

Interest expense and financing costs, net (1,236) (16,059) (228) (17,523)

Other income (expense), net (8) 618 — 610

Equity earnings (losses) from subsidiaries (9,713) — 9,713 —

Equity losses from Laramie Energy, LLC — — — —

Total other income (expense), net (10,957) (15,441) 9,485 (16,913)

Income (loss) before income taxes (14,271) (10,433) 10,541 (14,163)

Income tax benefit (expense) (1) — 2,148 (2,256) (108)

Net income (loss) $ (14,271) $ (8,285) $ 8,285 $ (14,271)

Adjusted EBITDA $ (2,569) $ (14,664) $ 1,183 $ (16,050)

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2021

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

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Total operating expenses 4,209 983,459 (54,326) 933,342

Operating income (loss) (11,249) (74,445) 54,324 (31,370)

Operating loss (4,209) (94,779) 54,326 (44,662)

Other income (expense)

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Adjusted EBITDA $ (3,112) $ (32,019) $ 716 $ (34,415)

Nine Months Ended September 30, 2020

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

and Subsidiaries

Revenues $ — $ 2,409,363 $ 2 $ 2,409,365

Operating expenses

Cost of revenues (excluding depreciation) — 2,236,778 — 2,236,778

Operating expense (excluding depreciation) — 213,425 (3,549) 209,876

Depreciation, depletion, and amortization 2,258 63,587 387 66,232

Impairment expense — 67,922 — 67,922

General and administrative expense (excluding depreciation) 8,190 23,633 — 31,823

Acquisition and integration costs — 600 — 600

Total operating expenses 10,448 2,605,945 (3,162) 2,613,231

Operating income (loss) (10,448) (196,582) 3,164 (203,866)

Other income (expense)

Interest expense and financing costs, net (3,709) (45,699) (3,203) (52,611)

Other income (expense), net 4 1,085 — 1,089

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

Equity earnings (losses) from subsidiaries (267,285) — 267,285 —

Equity losses from Laramie Energy, LLC — — (46,905) (46,905)

Total other income (expense), net (266,720) (44,614) 217,177 (94,157)

Income (loss) before income taxes (277,168) (241,196) 220,341 (298,023)

Income tax benefit (expense) (1) — 41,457 (20,602) 20,855

Net income (loss) $ (277,168) $ (199,739) $ 199,739 $ (277,168)

Adjusted EBITDA $ (8,029) $ (48,246) $ 3,551 $ (52,724)

________________________________________

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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.

Non-GAAP Financial Measures

Adjusted EBITDA for the supplemental consolidating condensed financial information, which is segregated at the “Parent Guarantor,” “Issuer and Subsidiaries,” and “Non-Guarantor Subsidiaries and Eliminations” levels, is calculated in the same manner as for the Par Pacific Holdings, Inc.

Adjusted EBITDA calculations.

See “Results of Operations — Non-GAAP Performance Measures — Adjusted Net Income (Loss) and Adjusted EBITDA” above.

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

Three Months Ended September 30, 2021

Three Months Ended March 31, 2022

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

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Inventory valuation adjustment — 80,653 — 80,653

LIFO liquidation adjustment — (4,151) — (4,151)

RINs loss (gain) in excess of net obligation — 7,256 — 7,256

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Acquisition and integration costs 63 — — 63

Debt extinguishment and commitment costs — 9 — 9

Severance costs 351 1,877 — 2,228

Loss (gain) on sale of assets, net — 2 — 2

Depreciation, depletion, and amortization 628 23,103 49 23,780

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Adjusted EBITDA (1) $ (3,834) $ 12,159 $ 13 $ 8,338

Three Months Ended September 30, 2020

Three Months Ended March 31, 2021

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

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Acquisition and integration costs 438 — — 438

Depreciation, depletion, and amortization 753 21,941 127 22,821

Interest expense and financing costs, net 1,236 16,059 228 17,523

Equity losses (income) from subsidiaries 9,713 — (9,713) —

Income tax expense (benefit) — (2,148) 2,256 108

Adjusted EBITDA (3) $ (2,569) $ (14,664) $ 1,183 $ (16,050)

Nine Months Ended September 30, 2021

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

and Subsidiaries

Net income (loss) $ (89,383) $ (97,401) $ 97,401 $ (89,383)

Inventory valuation adjustment — 38,732 — 38,732

RINs loss (gain) in excess of net obligation — 11,874 — 11,874

Unrealized loss on derivatives — 7,620 — 7,620

Acquisition and integration costs 87 — — 87

Debt extinguishment and commitment costs — 91 1,416 1,507

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Adjusted EBITDA (1) $ (3,112) $ (32,019) $ 716 $ (34,415)

Nine Months Ended September 30, 2020

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

and Subsidiaries

Net income (loss) $ (277,168) $ (199,739) $ 199,739 $ (277,168)

Inventory valuation adjustment — (4,635) — (4,635)

LIFO liquidation adjustment — 6,211 — 6,211

RINs loss (gain) in excess of net obligation — 17,985 — 17,985

Unrealized loss (gain) on derivatives — (4,507) — (4,507)

Acquisition and integration costs — 600 — 600

Changes in valuation allowance and other deferred tax items (1) — — (21,087) (21,087)

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

Severance costs 157 88 — 245

Impairment of Investment in Laramie Energy, LLC (2) — — 45,294 45,294

Par’s share of Laramie Energy’s unrealized gain on derivatives (2) — — (1,110) (1,110)

Impairment expense — 67,922 — 67,922

Depreciation, depletion, and amortization 2,258 63,587 387 66,232

Interest expense and financing costs, net 3,709 45,699 3,203 52,611

Equity losses from Laramie Energy, LLC, excluding Par’s share of unrealized gain on derivatives and impairment losses — — 2,721 2,721

Equity losses (income) from subsidiaries 267,285 — (267,285) —

Income tax expense (benefit) — (41,457) 41,689 232

Adjusted EBITDA (3) $ (8,029) $ (48,246) $ 3,551 $ (52,724)

________________________________________

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

(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 and nine months ended September 30, 2021, and the three months ended September 30, 2020, 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 nine months ended September 30, 2021, there was no LIFO liquidation adjustment.

For the three and nine months ended September 30, 2020, there were no debt extinguishment and commitment costs or losses (gains) on sale of assets.

For the three months ended September 30, 2020, there were no severance costs.

(1) For the three months ended March 31, 2022, and 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 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 months ended March 31, 2022, there was no LIFO liquidation adjustment, debt extinguishment and commitment costs, or losses (gains) 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 September 30, 2021 was $276.8 million and consisted of $272.2 million at Par Petroleum, LLC and subsidiaries, $4.6 million at Par Pacific Holdings, and an immaterial amount at all our other subsidiaries.

As of September 30, 2021, we had access to the ABL Credit Facility, the J.

Our liquidity position as of March 31, 2022 was $212.0 million and consisted of $207.4 million at Par Petroleum, LLC and subsidiaries, $4.7 million at Par Pacific Holdings, and an immaterial amount at all our other subsidiaries.

As of March 31, 2022, we had access to the ABL Credit Facility, the J.

Aron Discretionary Draw Facility, the MLC receivable advances, and cash on hand of $140.9 million.

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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 the Sale-Leaseback Transactions for an aggregate cash purchase price of approximately $112.8 million net of transaction fees.

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 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.

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

We may seek to raise additional debt or equity capital to fund any other significant changes to our business or to refinance existing debt.

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The Term Loan B Facility may also require annual prepayments of principal with a variable percentage of our excess cash flow, 50% or 25% depending on our consolidated year end secured leverage ratio (as defined in the Term Loan B Facility agreement).

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

Nine Months Ended September 30,

Net cash provided by operating activities $ 54,594 $ 25,953

The following table summarizes cash activities for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31,

Net cash used in operating activities $ (7,685) $ (30,737)

Net cash provided by (used in) investing activities (16,273) 94,678

Net cash provided by (used in) financing activities (1,954) 17,380

Net cash provided by operating activities was approximately $54.6 million for the nine months ended September 30, 2021, which resulted from a net loss of $89.4 million, offset by net cash provided by changes in operating assets and liabilities of approximately $125.3 million and non-cash charges to operations of approximately $18.7 million.

The change in our operating assets and liabilities for the nine months ended September 30, 2021 was primarily due to an increase in our gross environmental credit obligations of $147.0 million and a net increase in our Supply and Offtake Agreement and Washington Refinery Intermediation Agreement obligations of $178.6 million, partially offset by increases in inventories of $195.1 million and accounts receivable of $83.5 million.

Net cash provided by changes in operating assets and liabilities also includes an increase of $6.3 million in deferred turnaround costs.

Net cash provided by operating activities was approximately $26.0 million for the nine months ended September 30, 2020, which resulted from a net loss of approximately $277.2 million, partially offset by net cash provided by changes in operating assets and liabilities of approximately $117.5 million and non-cash charges to operations of approximately $185.6 million.

For the nine months ended September 30, 2021, net cash provided by investing activities was approximately $82.4 million and primarily related to proceeds received from the Sale-Leaseback Transactions partially offset by $21.0 million of additions to property, plant, and equipment.

Net cash used in investing activities was approximately $42.4 million for the nine months ended September 30, 2020 and primarily related to additions to property, plant, and equipment totaling approximately $42.5 million.

Net cash used in financing activities for the nine months ended September 30, 2021 was approximately $2.0 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 $66.2 million, partially offset by net debt and insurance premium repayments of approximately $148.7 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 nine months ended September 30, 2020 was approximately $17.4 million, which consisted primarily of net debt and insurance premium borrowings of approximately $85.5 million, partially offset by net repayments associated with the J.

Aron deferred payment and MLC receivable advances of approximately $60.8 million and payments of $6.3 million in deferred loan costs primarily related to the issuance of the 12.875% Senior Secured Notes.

Capital Expenditures and Turnaround Costs

Our deferred turnaround costs and capital expenditures, excluding acquisitions, for the nine months ended September 30, 2021 totaled approximately $27.3 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.

We also continue to seek strategic investments in business opportunities, but the amount and timing of those investments are not predictable.

Commitments and Contingencies

Supply and Offtake Agreement.

On June 1, 2021, we and J.

Aron entered into a Second Amended and Restated Supply and Offtake Agreement to support our Hawaii refining operations.

This agreement expires on May 31, 2024 with a one-year extension option.

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

Net cash provided by financing activities 52,611 82,483

Cash flows for the three months ended March 31, 2022

Net cash used in operating activities for the three months ended March 31, 2022 was driven primarily by a net loss of $137.1 million, offset by net cash provided by changes in operating assets and liabilities of approximately $85.9 million and non-cash charges to operations of approximately $43.4 million.

Non-cash charges to operations consisted primarily of the following adjustments:

• depreciation, depletion, and amortization expenses of $23.8 million;

• unrealized loss on derivatives contracts of $15.5 million;

• stock based compensation costs of $3.7 million.

Net cash provided by changes in operating assets and liabilities resulted primarily from:

• net increases in our Supply and Offtake Agreement and Washington Refinery Intermediation Agreement obligations and accounts payable;

• an increase in gross environmental credit obligations primarily related to current period production volumes and increases in RINs prices;

partially offset by

• net increases in our inventories and accounts receivable resulting from higher crude oil and refined product prices and higher inventory volumes at our Hawaii refinery;

• $28.9 million in deferred turnaround costs primarily related to the 2022 turnaround at our Washington refinery.

Net cash used in investing activities for the three months ended March 31, 2022 consisted primarily of $16.3 million in additions to property, plant, and equipment driven by profit improvement and turnaround projects including crude recovery and debottlenecking projects at our Tacoma refinery, maintenance projects at our Wyoming refinery, and co-generation engine and combustion projects at our Hawaii refinery.

Net cash provided by financing activities was approximately $52.6 million for the three months ended March 31, 2022 and consisted primarily of the following activities:

• net borrowings under the J.

Aron Discretionary Draw Facility and MLC receivable advances of $41.7 million;

• net borrowings of debt of $18.1 million primarily driven by increased borrowings on the ABL Revolver;

partially offset by

• repurchases of common stock of $6.4 million.

Cash flows for the three months ended March 31, 2021

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 and non-cash earnings from operations of approximately $54.3 million, partially offset by net cash provided by changes in operating assets and liabilities of approximately $85.8 million.

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

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 of common stock 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.

Cash Requirements

There have been no material changes to the cash requirements disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, outside the ordinary course of business except as follows:

Washington Refinery Intermediation Agreement .

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

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

On March 9, 2022, we and MLC amended the Washington Refinery Intermediation Agreement to advance the term expiry date from December 21, 2022 to March 31, 2023.

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

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of our business.

Please read Note 13—Commitments and Contingencies to our condensed consolidated financial statements for more information.

Critical Accounting Policies and Estimates

There have been no material changes to critical accounting policies disclosed in our Annual Report on Form 10-K.

Supply and Offtake Agreement.

On April 25, 2022, we entered into an amendment to the Supply and Offtake Agreement pursuant to which, among other things, the capacity under the Discretionary Draw Facility was increased from $165 million to $215 million.

Please read Note 19—Subsequent Events for further information about the amendment.

Critical Accounting Estimates

There have been no material changes to critical accounting estimates disclosed in our Annual Report on Form 10-K.

Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q may constitute “forward-looking” statements as defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Private Securities Litigation Reform Act of 1995 (“PSLRA”), or in releases made by the SEC, all as may be amended from time to time.

our beliefs with regard to available capital resources, our beliefs regarding the likelihood or impact of any potential fines or penalties and of the fair value of certain assets, and our expectations with respect to laws and regulations, including environmental regulations and related compliance costs and any fines or penalties related thereto;

Such forward-looking statements involve known and unknown risks, uncertainties, and other important factors including, without limitation, our expectations regarding the impact of COVID-19 along with a number of recent global events including the conflict between Russia and Ukraine and certain developments in the global crude oil markets on our business, our customers, and the markets where we operate;

our beliefs regarding available capital resources;

our beliefs regarding the likely results or impact of certain disputes or contingencies and any potential fines or penalties;

our beliefs regarding the fair value of certain assets, and our expectations with respect to laws and regulations, including environmental regulations and related compliance costs and any fines or penalties related thereto;

our expectations regarding the sufficiency of our cash flows and liquidity;

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and the estimates, assumptions, and projections regarding future financial condition, results of operations, liquidity, and cash flows.

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

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.

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and we cannot assure any reader that such statements will be realized or that the forward-looking events and circumstances will occur.

Actual results may differ materially from those anticipated or implied in the forward-looking statements due to factors described above and under Critical Accounting Policies and Risk Factors included in our most recent Annual Report on Form 10-K and in this Quarterly Report on Form 10-Q.

Actual results may differ materially from those anticipated or implied in the forward-looking statements due to factors described above and under Critical Accounting Estimates and Risk Factors included in our most recent Annual Report on Form 10-K and in this Quarterly Report on Form 10-Q.

All forward-looking statements speak only as of the date they are made.

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Due to the unpredictable and unprecedented nature of the COVID-19 pandemic, we cannot identify all potential risks to, and impacts on, our business, including the ultimate adverse economic impact to the Company’s business, results of operations, financial condition, and liquidity.

However, the adverse impact of COVID-19 on the Company has been and will likely continue to be material.

There can be no guarantee that the operational and financial measures the Company has taken, and may take in the future, will be fully

There can be no guarantee that the operational and financial measures the Company has taken, and may take in the future, will be fully effective.

We do not intend to update or revise any forward-looking statements as a result of new information, future events, or otherwise.

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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