PAR PACIFIC HOLDINGS, INC. 10-Q

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview We are a growth-oriented company based in Houston, Texas, that owns and operates market-leading energy and infrastructure businesses. Our business is organized into three primary segments: 1) Refining - We own and operate 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. 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, 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, including, among other things, a change in the size of our investment. We have four reportable segments: (i) Refining, (ii) Retail, (iii) Logistics, and (iv) Corporate and Other. Our Corporate and Other reportable segment primarily includes general and administrative costs. Please read Note 17—Segment Information to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for detailed information on our operating results by segment. Recent Events Affecting Comparability of Periods Over the last twelve months, increased demand for and reduced supply of refined product has led to increased crude oil prices. The rise in demand from 2021 to 2022 is driven by a recovery of global travel to pre-pandemic levels as well as a return to in-office work. 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, as of April, the U.S. Transportation Security Administration (“TSA”) no longer requires masking on U.S. domestic flights. 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 and Hawaii visitor counts for the first half of 2022 are in excess of 90% of pre-pandemic levels. In 2022, higher national gasoline prices and U.S. inflation have affected most Americans. Following high gasoline prices in the summer, prices at the pump fell from June through September. Even with these third quarter declines, the overall energy index is up 19.8% year over year as of September 2022. Rising gasoline prices, and rising energy prices overall, are indicators of inflation and the U.S. Federal Reserve (the “Fed”) has taken significant steps to curb inflation. In summer 2022, the Fed increased its benchmark interest rate by 75 basis points twice, to 1.75% in June and to 2.5% in July. The rate increased again by 75 basis points in September 2022, as expected, because the summer rate changes did not measurably slow inflation. Following the September meeting, the Fed indicated its intent to raise rates by an additional 1.25% this year. These actions by the Fed are intended to cool rising U.S. inflation rates, which have increased 8.2% year over year as of September 2022, by slowing economic growth and nonessential consumer spending (including travel). If consumer spending decreases as a result of these actions, it is expected that demand and prices for our products will decrease in kind. 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. 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. In the third quarter, the global market for energy commodities experienced moderately declining prices driven by increased supply expectations after twelve months of rising prices. In response, the Organization of the Petroleum Exporting Companies (“OPEC”) announced on October 5 that it would cut production by two million barrels a day (representing approximately 2% of global oil production) with the intention of raising global oil prices. 29 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 rebounding demand driven by decreasing COVID-19 pandemic-related demand suppression experienced in the regions in which we operate. However, 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, 2022 compared to the three months ended September 30, 2021 Net Income. Our financial results for the third quarter of 2022 improved from net income of $81.8 million for the three months ended September 30, 2021 to net income of $267.4 million for the three months ended September 30, 2022. The increase was primarily driven by higher product crack spreads across all of our refineries and a favorable change in the valuation of the embedded derivatives related to our inventory financing agreements driven by changes in commodity prices. These factors were partially offset by higher crude oil differentials and a $70.8 million increase in RINs expenses. Adjusted EBITDA and Adjusted Net Income. For the three months ended September 30, 2022, Adjusted EBITDA was $214.1 million compared to $58.2 million for the three months ended September 30, 2021. The increase was primarily related to improved product crack spreads across all of our refineries, favorable realized commodity derivatives, and an 11% increase in refining sales volumes at our Washington refinery, partially offset by unfavorable crude oil and purchased product differentials, a $35.1 million increase in intermediation fees driven primarily by higher market structure fees under the Supply and Offtake Agreement, and higher fuel burn costs. For the three months ended September 30, 2022, Adjusted Net Income was $172.0 million compared to $18.6 million for the three months ended September 30, 2021. The improvement was primarily related to the factors described above for the increase in Adjusted EBITDA. Nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 Net Income (Loss). Our financial results improved from a net loss of $89.4 million for the nine months ended September 30, 2021 to net income of $279.5 million for the nine months ended September 30, 2022. The increase in profitability was primarily driven by higher product crack spreads across all of our refineries and a favorable change in the valuation of the embedded derivatives related to our inventory financing agreements driven by changes in commodity prices. These factors were partially offset by unfavorable crude oil and purchased product differentials, higher fuel burn costs and intermediation fees, unfavorable commodity derivatives, and a $22.9 million increase in RINs expenses. Other factors impacting our results period over period include a gain of $63.9 million related to the 2021 Hawaii sale-leaseback transactions in the nine months ended September 30, 2021 with no such gain in the 2022 comparable period and a 14% increase in operating expenses compared to the comparable period in 2021. Adjusted EBITDA and Adjusted Net Income (Loss). For the nine months ended September 30, 2022, Adjusted EBITDA was $468.5 million compared to $98.6 million for the nine months ended September 30, 2021. The improvement was primarily related to favorable product crack spreads across all of our refineries partially offset by unfavorable crude oil and purchased product differentials, a $65.3 million increase in intermediation fees driven primarily by higher market structure fees under the Supply and Offtake Agreement, unfavorable realized commodity derivatives, and higher fuel burn costs. Other factors impacting our results period over period include a 14% increase in operating expenses in 2022 compared to the comparable period in 2021. For the nine months ended September 30, 2022, Adjusted Net Income was $341.9 million compared to a loss of $23.4 million for the nine months ended September 30, 2021. The improvement was primarily related to the same factors described above for the increase in Adjusted EBITDA. 30 The following tables summarize our consolidated results of operations for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 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, 2022 2021 $ Change % Change Revenues $ 2,056,285 $ 1,310,368 $ 745,917 57% Cost of revenues (excluding depreciation) 1,642,626 1,098,422 544,204 50% Operating expense (excluding depreciation) 88,329 78,059 10,270 13% Depreciation and amortization 25,125 23,618 1,507 6% Loss (gain) on sale of assets, net (185) 2 (187) (9,350)% General and administrative expense (excluding depreciation) 16,219 12,473 3,746 30% Acquisition and integration costs — 1 (1) (100)% Total operating expenses 1,772,114 1,212,575 Operating income 284,171 97,793 Other income (expense) Interest expense and financing costs, net (16,852) (15,374) (1,478) 10% Debt extinguishment and commitment costs 343 (9) 352 3,911% Other expense, net (198) (22) (176) 800% Total other expense, net (16,707) (15,405) Income before income taxes 267,464 82,388 Income tax expense (68) (586) 518 (88)% Net income $ 267,396 $ 81,802 Nine Months Ended September 30, 2022 2021 $ Change % Change Revenues $ 5,512,910 $ 3,416,573 $ 2,096,337 61% Cost of revenues (excluding depreciation) 4,801,800 3,184,583 1,617,217 51% Operating expense (excluding depreciation) 252,075 221,068 31,007 14% Depreciation and amortization 74,488 70,046 4,442 6% Gain on sale of assets, net (170) (64,400) 64,230 (100)% General and administrative expense (excluding depreciation) 47,550 36,559 10,991 30% Acquisition and integration costs 63 87 (24) (28)% Total operating expenses 5,175,806 3,447,943 Operating income (loss) 337,104 (31,370) Other income (expense) Interest expense and financing costs, net (51,400) (50,711) (689) 1% Debt extinguishment and commitment costs (5,329) (8,144) 2,815 (35)% Gain on curtailment of pension obligation — 2,032 (2,032) (100)% Other income (expense), net (149) 3 (152) (5,067)% Total other expense, net (56,878) (56,820) Income (loss) before income taxes 280,226 (88,190) Income tax expense (756) (1,193) 437 (37)% Net income (loss) $ 279,470 $ (89,383) 31 The following tables summarize our operating income (loss) by segment for the three and nine months ended September 30, 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, 2022 Refining Logistics Retail Corporate, Eliminations and Other (1) Total Revenues $ 1,974,701 $ 54,635 $ 157,385 $ (130,436) $ 2,056,285 Cost of revenues (excluding depreciation) 1,629,019 28,482 115,574 (130,449) 1,642,626 Operating expense (excluding depreciation) 63,049 3,710 21,570 — 88,329 Depreciation and amortization 16,542 5,059 2,865 659 25,125 Loss (gain) on sale of assets, net — (241) 56 — (185) General and administrative expense (excluding depreciation) — — — 16,219 16,219 Operating income (loss) $ 266,091 $ 17,625 $ 17,320 $ (16,865) $ 284,171 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 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 ________________________________________________________ (1) Includes eliminations of intersegment Revenues and Cost of revenues (excluding depreciation) of $130.4 million and $105.1 million for the three months ended September 30, 2022 and 2021, respectively. Nine months ended September 30, 2022 Refining Logistics Retail Corporate, Eliminations and Other (1) Total Revenues $ 5,318,379 $ 147,729 $ 424,505 $ (377,703) $ 5,512,910 Cost of revenues (excluding depreciation) 4,772,511 77,970 329,058 (377,739) 4,801,800 Operating expense (excluding depreciation) 180,450 11,280 60,345 — 252,075 Depreciation and amortization 48,854 15,357 8,156 2,121 74,488 Loss (gain) on sale of assets, net — (253) 56 27 (170) General and administrative expense (excluding depreciation) — — — 47,550 47,550 Acquisition and integration costs — — — 63 63 Operating income (loss) $ 316,564 $ 43,375 $ 26,890 $ (49,725) $ 337,104 32 Nine months ended September 30, 2021 Refining Logistics Retail Corporate, Eliminations and Other (1) Total Revenues $ 3,237,450 $ 136,750 $ 335,544 $ (293,171) $ 3,416,573 Cost of revenues (excluding depreciation) 3,160,348 71,473 245,930 (293,168) 3,184,583 Operating expense (excluding depreciation) 156,895 11,144 53,029 — 221,068 Depreciation and amortization 43,373 16,176 8,164 2,333 70,046 Gain on sale of assets, net (19,595) (19) (44,786) — (64,400) General and administrative expense (excluding depreciation) — — — 36,559 36,559 Acquisition and integration costs — — — 87 87 Operating income (loss) $ (103,571) $ 37,976 $ 73,207 $ (38,982) $ (31,370) ________________________________________________________ (1) Includes eliminations of intersegment Revenues and Cost of revenues (excluding depreciation) of $377.7 million and $293.2 million for the nine months ended September 30, 2022 and 2021, respectively. 33 Below is a summary of key operating statistics for the refining segment for the three and nine months ended September 30, 2022 and 2021: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Total Refining Segment Feedstocks Throughput (Mbpd) 138.5 137.3 132.8 135.1 Refined product sales volume (Mbpd) 149.3 144.9 138.5 140.5 Hawaii Refinery Feedstocks Throughput (Mbpd) 79.7 81.0 82.2 82.0 Yield (% of total throughput) Gasoline and gasoline blendstocks 28.1 % 23.3 % 25.4 % 24.2 % Distillates 39.3 % 45.9 % 39.5 % 45.3 % Fuel oils 30.1 % 24.9 % 31.1 % 26.0 % Other products (0.9) % 3.4 % 0.6 % 1.5 % Total yield 96.6 % 97.5 % 96.6 % 97.0 % Refined product sales volume (Mbpd) On-island sales volume 84.7 86.7 81.0 83.9 Exports sales volume 1.9 — 0.6 — Total refined product sales volume 86.6 86.7 81.6 83.9 Adjusted Gross Margin per bbl ($/throughput bbl) (1) $ 19.49 $ 6.02 $ 13.92 $ 4.35 Production costs per bbl ($/throughput bbl) (2) 5.14 4.28 4.67 3.89 D&A per bbl ($/throughput bbl) 0.68 0.67 0.66 0.67 Washington Refinery Feedstocks Throughput (Mbpd) 40.5 38.4 33.8 36.3 Yield (% of total throughput) Gasoline and gasoline blendstocks 24.2 % 22.8 % 24.4 % 23.6 % Distillates 34.1 % 33.0 % 34.1 % 34.3 % Asphalt 20.2 % 22.5 % 19.9 % 20.9 % Other products 18.4 % 18.7 % 18.5 % 18.4 % Total yield 96.9 % 97.0 % 96.9 % 97.2 % Refined product sales volume (Mbpd) 45.3 40.7 39.9 40.3 Adjusted Gross Margin per bbl ($/throughput bbl) (1) $ 19.97 $ 3.52 $ 16.51 $ 2.63 Production costs per bbl ($/throughput bbl) (2) 3.43 3.60 4.19 3.70 D&A per bbl ($/throughput bbl) 2.02 1.48 2.28 1.56 34 Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Wyoming Refinery Feedstocks Throughput (Mbpd) 18.3 17.9 16.8 16.8 Yield (% of total throughput) Gasoline and gasoline blendstocks 48.3 % 46.5 % 48.8 % 46.9 % Distillates 43.9 % 46.2 % 43.6 % 46.0 % Fuel oils 3.0 % 2.3 % 2.5 % 2.1 % Other products 2.5 % 2.1 % 2.5 % 2.0 % Total yield 97.7 % 97.1 % 97.4 % 97.0 % Refined product sales volume (Mbpd) 17.4 17.5 17.0 16.3 Adjusted Gross Margin per bbl ($/throughput bbl) (1) $ 19.39 $ 21.84 $ 29.20 $ 16.45 Production costs per bbl ($/throughput bbl) (2) 6.63 5.92 7.14 6.49 D&A per bbl ($/throughput bbl) 2.40 2.77 2.82 2.83 Market Indices (average $ per barrel) 3-1-2 Singapore Crack Spread (3) $ 26.43 $ 6.20 $ 26.52 $ 4.80 Pacific Northwest 5-2-2-1 Index (4) 33.21 18.59 33.79 15.39 Wyoming 3-2-1 Index (5) 45.78 41.78 42.36 31.01 Crude Oil Prices (average $ per barrel) Brent $ 97.70 $ 73.23 $ 102.53 $ 67.92 WTI 91.43 70.52 98.31 64.99 ANS 103.80 73.83 106.41 68.35 Bakken Clearbrook 95.49 70.77 102.09 64.84 WCS Hardisty 70.93 57.54 82.23 52.39 Brent M1-M3 3.94 1.36 4.10 1.05 ________________________________________________________ (1) We calculate Adjusted Gross Margin per barrel by dividing Adjusted Gross Margin by total refining throughput. Adjusted Gross Margin for our Washington refinery is determined under the last-in, first-out (“LIFO”) inventory costing method. Adjusted Gross Margin for our other refineries is determined under the first-in, first-out (“FIFO”) inventory costing method. The definition of Adjusted Gross Margin was modified beginning with the financial results reported for periods in fiscal year 2022. We have recast Adjusted Gross Margin for prior periods when reported to conform to the modified presentation. Please see discussion of Adjusted Gross Margin below. (2) Management uses production costs per barrel to evaluate performance and compare efficiency to other companies in the industry. There are a variety of ways to calculate production costs per barrel; different companies within the industry calculate it in different ways. We calculate production costs per barrel by dividing all direct production costs, which include the costs to run the refineries including personnel costs, repair and maintenance costs, insurance, utilities, and other miscellaneous costs, by total refining throughput. Our production costs are included in Operating expense (excluding depreciation) on our condensed consolidated statement of operations, which also includes costs related to our bulk marketing operations. (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 for our 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. The Pacific Northwest 5-2-2-1 Index is computed by taking two parts gasoline (sub-octane), two parts middle distillates (ultra-low sulfur diesel (“ULSD”) and jet fuel), and one part fuel oil as created from five barrels of Alaskan North Slope (“ANS”) crude oil. 35 (5) The profitability of our Wyoming refinery is heavily influenced by crack spreads in nearby markets. We believe the Wyoming 3-2-1 Index is the most representative market indicator for our operations in Wyoming. The Wyoming 3-2-1 Index is computed by taking two parts gasoline and one part distillates (ULSD) as created from three barrels of West Texas Intermediate Crude Oil (“WTI”). Pricing is based 50% on applicable product pricing in Rapid City, South Dakota, and 50% on applicable product pricing in Denver, Colorado. Below is a summary of key operating statistics for the retail segment for the three and nine months ended September 30, 2022 and 2021: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Retail Segment Retail sales volumes (thousands of gallons) 27,829 28,746 78,599 82,418 Non-GAAP Performance Measures Management uses certain financial measures to evaluate our operating performance that are considered non-GAAP financial measures. These measures should not be considered 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 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 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. Beginning with financial results reported for the second quarter of 2022, Adjusted Gross Margin, Adjusted Net Income (Loss), and Adjusted EBITDA also exclude the mark-to-market losses (gains) associated with our net RINs liability. This modification was made to better reflect our operating performance and to improve comparability between periods. We have recast Adjusted Gross Margin, Adjusted Net Income (Loss), and Adjusted EBITDA for prior periods when reported to conform to the modified presentation. Adjusted Gross Margin Adjusted Gross Margin is defined as operating income (loss) excluding: • operating expense (excluding depreciation); • depreciation and amortization (“D&A”); • impairment expense; • 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); • LIFO layer liquidation impacts associated with our Washington inventory; 36 • Renewable Identification Numbers (“RINs”) mark-to-market adjustments (which represents the income statement effect of reflecting our RINs liability on a net basis; this adjustment also includes the mark-to-market losses (gains) associated with our net RINs liability); and • unrealized loss (gain) on derivatives. Adjusted Gross Margin can also be defined as revenues less cost of revenues (excluding depreciation) excluding: • inventory valuation adjustment; • unrealized loss (gain) on derivatives; • LIFO layer liquidation impacts associated with our Washington inventory; and • RINs mark-to-market adjustments. 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. 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, 2022 Refining Logistics Retail Operating income $ 266,091 $ 17,625 $ 17,320 Operating expense (excluding depreciation) 63,049 3,710 21,570 Depreciation and amortization 16,542 5,059 2,865 Loss (gain) on sale of assets, net — (241) 56 Inventory valuation adjustment (91,135) — — RINs mark-to-market adjustments (6,731) — — Unrealized loss on derivatives 3,004 — — Adjusted Gross Margin (1) $ 250,820 $ 26,153 $ 41,811 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 and amortization 14,748 5,545 2,630 Loss (gain) on sale of assets, net — 2 — Inventory valuation adjustment 2,784 — — LIFO liquidation adjustment (4,151) — — RINs mark-to-market adjustments (72,087) — — Unrealized loss on derivatives 10,228 — — Adjusted Gross Margin (1) $ 93,548 $ 22,658 $ 32,523 37 Nine months ended September 30, 2022 Refining Logistics Retail Operating income $ 316,564 $ 43,375 $ 26,890 Operating expense (excluding depreciation) 180,450 11,280 60,345 Depreciation and amortization 48,854 15,357 8,156 Loss (gain) on sale of assets, net — (253) 56 Inventory valuation adjustment (18,039) — — RINs mark-to-market adjustments 83,119 — — Unrealized gain on derivatives (10,151) — — Adjusted Gross Margin (1) $ 600,797 $ 69,759 $ 95,447 Nine months ended September 30, 2021 Refining Logistics Retail Operating income (loss) $ (103,571) $ 37,976 $ 73,207 Operating expense (excluding depreciation) 156,895 11,144 53,029 Depreciation and amortization 43,373 16,176 8,164 Loss (gain) on sale of assets, net (19,595) (19) (44,786) Inventory valuation adjustment 55,527 — — RINs mark-to-market adjustments 58,973 — — Unrealized loss on derivatives 7,620 — — Adjusted Gross Margin (1) $ 199,222 $ 65,277 $ 89,614 ____________________________________________________________________________ (1) For the three and nine months ended September 30, 2022 and 2021, there was no impairment expense recorded in Operating income (loss). For the three and nine months ended September 30, 2022 and the nine months ended September 30, 2021, there was no LIFO liquidation adjustment 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 mark-to-market adjustments (which represents the income statement effect of reflecting our RINs liability on a net basis; this adjustment also includes the mark-to-market losses (gains) associated with our net RINs liability); • 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 defined as Adjusted Net Income (Loss) excluding: • D&A; • interest expense and financing costs; 38 • 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). 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, 2022 2021 2022 2021 Net Income (Loss) $ 267,396 $ 81,802 $ 279,470 $ (89,383) Inventory valuation adjustment (91,135) 2,784 (18,039) 55,527 LIFO liquidation adjustment — (4,151) — — RINs mark-to-market adjustments (6,731) (72,087) 83,119 58,973 Unrealized loss (gain) on derivatives 3,004 10,228 (10,151) 7,620 Acquisition and integration costs — 1 63 87 Debt extinguishment and commitment costs (343) 9 5,329 8,144 Severance costs 9 59 2,272 75 Loss (gain) on sale of assets, net (185) 2 (170) (64,400) Adjusted Net Income (Loss) (1) 172,015 18,647 341,893 (23,357) Depreciation and amortization 25,125 23,618 74,488 70,046 Interest expense and financing costs, net 16,852 15,374 51,400 50,711 Income tax expense 68 586 756 1,193 Adjusted EBITDA (1) $ 214,060 $ 58,225 $ 468,537 $ 98,593 ________________________________________ (1) For the three and nine months ended September 30, 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, 2022 compared to the three months ended September 30, 2021 Refining. Operating income for our refining segment was $266.1 million for the three months ended September 30, 2022, an increase of $179.7 million compared to $86.4 million for the three months ended September 30, 2021. The increase was primarily driven by improved product crack spreads across all of our refineries and a favorable change in the valuation of the embedded derivatives related to our inventory financing agreements driven by changes in commodity prices, partially offset by unfavorable crude oil differentials, a $70.8 million increase in RINs expenses, and a $35.1 million increase in intermediation fees driven primarily by higher market structure fees under the Supply and Offtake Agreement. Logistics. Operating income for our logistics segment was $17.6 million for the three months ended September 30, 2022, an increase of $4.2 million compared to $13.4 million for the three months ended September 30, 2021. The increase is primarily due to higher third party revenues. Retail. Operating income for our retail segment was $17.3 million for the three months ended September 30, 2022, an increase of $6.1 million compared to $11.2 million for the three months ended September 30, 2021. The increase was primarily due to a 42% increase in fuel margins related to declining crude oil prices in the three months ended September 30, 2022 compared to rising prices in the comparative period of 2021, partially offset by a 16% increase in operating expenses in the three months ended September 30, 2022 related to increased employee costs and higher credit card processing fees due to increased gasoline prices. 39 Nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 Refining. Operating income for our refining segment was $316.6 million for the nine months ended September 30, 2022, an improvement of $420.2 million compared to an operating loss of $103.6 million for the nine months ended September 30, 2021. The increase in profitability was primarily driven by improved product crack spreads across all of our refineries and a favorable change in the valuation of the embedded derivatives related to our inventory financing agreements driven by changes in commodity prices, partially offset by unfavorable crude oil and purchased product differentials, a $65.3 million increase in intermediation fees driven primarily by higher market structure fees under the Supply and Offtake Agreement, higher fuel burn costs, unfavorable commodity derivatives, and a $22.9 million increase in RINs expenses. Other factors impacting our results period over period include a gain on sale of assets of $19.6 million in the nine months ended September 30, 2021 primarily related to the 2021 Hawaii sale-leaseback transactions we closed in the first quarter of 2021 with no such gain in 2022 and a 15% increase in operating expenses in the nine months ended September 30, 2021 primarily related to increased utility costs, planned repairs and maintenance, and higher employee costs. Logistics. Operating income for our logistics segment was $43.4 million for the nine months ended September 30, 2022, an increase of $5.4 million compared to $38.0 million for the nine months ended September 30, 2021. The increase was primarily due to increased third party revenues and a 5% increase in throughput across our Washington assets, partially offset by a 9% increase in cost of sales driven primarily by higher marine vessel fees and fuel costs. Retail. Operating income for our retail segment was $26.9 million for the nine months ended September 30, 2022, a decrease of $46.3 million compared to $73.2 million for the nine months ended September 30, 2021. The decrease in profitability is primarily due to a gain on sale of assets of $44.8 million in the nine months ended September 30, 2021 related to the 2021 Hawaii sale-leaseback transactions we closed in the first quarter of 2021 with no such gain in 2022 and a 14% increase in operating expenses in the nine months ended September 30, 2022 primarily related to higher repair and maintenance expenses, increased employee costs, higher credit card processing fees due to increased gasoline prices, and higher rent expense related to the additional leases from our 2021 Hawaii sale-leaseback transactions, partially offset by a 15% increase in fuel margin. Adjusted Gross Margin Three months ended September 30, 2022 compared to the three months ended September 30, 2021 Refining. For the three months ended September 30, 2022, our refining Adjusted Gross Margin was $250.8 million, an increase of $157.3 million compared to $93.5 million for the three months ended September 30, 2021. The increase was primarily driven by improved product crack spreads and favorable realized commodity derivatives, partially offset by higher crude oil and purchased product differentials and higher intermediation fees in Hawaii. Adjusted Gross Margin for the Hawaii refinery increased from $6.02 per barrel during the three months ended September 30, 2021 to $19.49 per barrel during the three months ended September 30, 2022. The improvement was primarily due to improved product crack spreads and favorable realized commodity derivatives, partially offset by unfavorable crude oil and purchased product differentials, a $35.1 million increase in intermediation fees driven primarily by higher market structure fees under the Supply and Offtake Agreement, and higher fuel burn costs. Adjusted Gross Margin for the Washington refinery increased by $16.45 per barrel primarily due to improved product crack spreads and an 11% increase in sales volumes, partially offset by unfavorable crude oil differentials. Adjusted Gross Margin for the Wyoming refinery decreased by $2.45 per barrel primarily due to an unfavorable FIFO change of $15.4 million, unfavorable crude differentials, and higher RINs expenses related to current period production, partially offset by improved product crack spreads. Logistics. For the three months ended September 30, 2022, our logistics Adjusted Gross Margin was $26.2 million, an increase of $3.5 million compared to $22.7 million for the three months ended September 30, 2021. The increase is primarily due to higher revenues from third party services. Retail. For the three months ended September 30, 2022, our retail Adjusted Gross Margin was $41.8 million, an increase of $9.3 million compared to $32.5 million for the three months ended September 30, 2021. The increase was primarily due to a 42% increase in fuel margins related to declining crude oil prices in the three months ended September 30, 2022 compared to rising crude oil prices in the comparable period in 2021. Nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 Refining. For the nine months ended September 30, 2022, our refining Adjusted Gross Margin was $600.8 million, an increase of $401.6 million compared to $199.2 million for the nine months ended September 30, 2021. The increase was primarily due to favorable product crack spreads across all our refineries partially offset by unfavorable crude oil and purchased 40 product differentials, higher intermediation fees in Hawaii, unfavorable realized commodity derivatives, and higher fuel burn costs. Adjusted Gross Margin for the Hawaii refinery improved from $4.35 per barrel during the nine months ended September 30, 2021 to $13.92 per barrel during the nine months ended September 30, 2022. The improvement was primarily due to improved product crack spreads, partially offset by unfavorable crude oil and purchased product differentials, a $65.3 million increase in intermediation fees driven primarily by higher market structure fees under the Supply and Offtake Agreement, unfavorable realized commodity derivatives, and higher fuel burn costs. Adjusted Gross Margin for the Washington refinery increased by $13.88 per barrel primarily due to favorable product crack spreads partially offset by unfavorable crude oil differentials. Adjusted Gross Margin for the Wyoming refinery increased by $12.75 per barrel primarily due to improved product crack spreads partially offset by unfavorable crude oil differentials. Logistics. For the nine months ended September 30, 2022, our logistics Adjusted Gross Margin was $69.8 million, an increase of $4.5 million compared to $65.3 million for the nine months ended September 30, 2021. The increase was primarily due to increased revenues from third party services and a 5% increase in throughput across our Washington assets, partially offset by a 9% increase in cost of sales driven primarily by higher marine vessel fees and fuel costs. Retail. For the nine months ended September 30, 2022, our retail Adjusted Gross Margin was $95.4 million, an increase of $5.8 million compared to $89.6 million for the nine months ended September 30, 2021. The increase was primarily due to a 15% increase in fuel margins related to declining crude oil prices in the three months ended September 30, 2022 partially offset by a 5% decline in fuel sales volumes. Discussion of Consolidated Results Three months ended September 30, 2022 compared to the three months ended September 30, 2021 Revenues. For the three months ended September 30, 2022, revenues were $2.1 billion, a $0.8 billion increase compared to $1.3 billion for the three months ended September 30, 2021. The increase was primarily due to an increase of $0.7 billion in third-party refining segment revenue as a result of increases in Brent and WTI crude oil prices, an increase in average product crack spreads, and an 11% increase in refining sales volumes at our Washington refinery. Average Brent crude oil prices increased to $97.70 per barrel during the third quarter of 2022 compared to $73.23 per barrel during the third quarter of 2021, and average WTI crude oil prices increased to $91.43 per barrel during the third quarter of 2022 compared to $70.52 per barrel during the third quarter of 2021. Revenues at our retail segment increased $31.5 million primarily due to a 35% increase in fuel prices. Cost of Revenues (Excluding Depreciation). For the three months ended September 30, 2022, cost of revenues (excluding depreciation) was $1.6 billion, a $0.5 billion increase compared to $1.1 billion for the three months ended September 30, 2021. The increase was primarily driven by higher Brent and WTI crude oil prices as discussed above and unfavorable crude oil and purchased product differentials, a $70.8 million increase in RINs expenses, a $35.1 million increase in intermediation fees driven primarily by higher market structure fees under the Supply and Offtake Agreement, an 11% increase in refining sales volumes at our Washington refinery, and higher fuel burn costs, partially offset by a favorable change in the valuation of the embedded derivatives related to our inventory financing agreements driven by changes in commodity prices, and favorable commodity derivatives. Other factors impacting our results period over period include 33% higher fuel costs at our retail segment. Operating Expense (Excluding Depreciation). For the three months ended September 30, 2022, operating expense (excluding depreciation) was $88.3 million, a $10.2 million increase when compared to $78.1 million for the three months ended September 30, 2021. The increase in operating expenses was primarily driven by higher utility and maintenance costs and increased employee costs. Depreciation and Amortization . For the three months ended September 30, 2022, D&A was $25.1 million, an increase of $1.5 million compared to $23.6 million for the three months ended September 30, 2021. The increase was primarily due to the amortization of our Washington refinery turnaround projects completed in the first quarter of 2022. General and Administrative Expense (Excluding Depreciation). For the three months ended September 30, 2022, general and administrative expense (excluding depreciation) was $16.2 million, an increase of $3.7 million compared to $12.5 million for the three months ended September 30, 2021. The increase was primarily due to an increase in employee costs and outside services related to profit improvement projects. Interest Expense and Financing Costs, Net . For the three months ended September 30, 2022, our interest expense and financing costs were $16.9 million, an increase of $1.5 million compared to $15.4 million for the three months ended September 30, 2021. The increase was primarily due to higher balances on our inventory financing agreements, partially offset 41 by lower outstanding debt balances driven by early repayments of the outstanding 12.875% Senior Secured Notes in the second quarters of 2021 and 2022 and the final maturity of the 5.00% Convertible Senior Notes on June 15, 2021. Please read Note 7—Inventory Financing Agreements and Note 9—Debt to our condensed consolidated financial statements for further discussion on our intermediation agreements and indebtedness, respectively. Income Taxes. For the three months ended September 30, 2022, we recorded income tax expense of $0.1 million primarily related to increased taxable income. For the three months ended September 30, 2021, we recorded an income tax expense of $0.6 million primarily related to foreign taxes. Nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 Revenues. For the nine months ended September 30, 2022, revenues were $5.5 billion, a $2.1 billion increase compared to $3.4 billion for the nine months ended September 30, 2021. The increase was primarily due to an increase of $2.0 billion in third-party revenues at our refining segment, primarily related to higher crude oil prices and product crack spreads across all our refining locations. Average Brent crude oil prices rose to $102.53 in the nine months ended September 30, 2022 compared to $67.92 per barrel in the nine months ended September 30, 2021, and average WTI crude oil prices rose to $98.31 per barrel during the nine months ended September 30, 2022 compared to $64.99 in the nine months ended September 30, 2021. Revenues at our retail segment increased $89.0 million primarily due to a 41% increase in fuel prices. Cost of Revenues (Excluding Depreciation). For the nine months ended September 30, 2022, cost of revenues (excluding depreciation) was $4.8 billion, a $1.6 billion increase compared to $3.2 billion for the nine months ended September 30, 2021. The increase was primarily due to increases in Brent and WTI crude oil prices as discussed above, higher crude oil and purchased product differentials, a $65.3 million increase in intermediation fees driven primarily by higher market structure fees under the Supply and Offtake Agreement, higher fuel burn costs, and unfavorable commodity derivatives, partially offset by a favorable change in valuation of the embedded derivatives related to our inventory financing agreements driven by changes in commodity prices. Other factors impacting our results period over period include 50% higher fuel costs at our retail segment. Operating Expense (Excluding Depreciation). For the nine months ended September 30, 2022, operating expense (excluding depreciation) was $252.1 million, an increase of $31.0 million compared to $221.1 million for the nine months ended September 30, 2021. The increase was primarily driven by higher utility and maintenance expenses, increased employee costs, and higher retail credit card processing fees related to increased gasoline prices. Depreciation and Amortization . For the nine months ended September 30, 2022, D&A was $74.5 million, an increase of $4.5 million compared to $70.0 million for the nine months ended September 30, 2021. The increase was primarily due to the amortization of our Washington refinery turnaround projects completed in the first quarter of 2022. Gain on Sale of Assets, Net. For the nine months ended September 30, 2022, there was a $0.2 million gain on sale of assets, net, which resulted primarily from the sale of equipment. 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 Hawaii sale-leaseback transactions we closed in the first quarter of 2021. General and Administrative Expense (Excluding Depreciation). For the nine months ended September 30, 2022, general and administrative expense (excluding depreciation) was $47.6 million, an increase of $11.0 million compared to $36.6 million for the nine months ended September 30, 2021. The increase was primarily due to higher employee costs. Interest Expense and Financing Costs, Net . For the nine months ended September 30, 2022, our interest expense and financing costs were $51.4 million, an increase of $0.7 million when compared to $50.7 million for the nine months ended September 30, 2021. The increase was primarily due to increased balances on our inventory financing agreements, partially offset by lower outstanding debt balances in 2022 driven by early partial repayments of the outstanding 12.875% Senior Secured Notes in the second quarters of 2021 and 2022 and the full repayment at maturity of the 5.00% Convertible Senior Notes in June 2021. 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 represented $6.6 million in extinguishment costs associated with the redemption of $36.8 million of 12.875% Senior Secured Notes in June 2021 and $1.4 million in extinguishment costs associated with the repayment of the Retail Property Term Loan on February 23, 2021. For the nine months ended September 30, 2022, our debt extinguishment and commitment costs were $5.3 million and primarily represented extinguishment costs associated with the repurchase and cancellation of an additional $36.9 million of 12.875% Senior Secured 42 Notes in the second quarter of 2022. Please read Note 9—Debt to our condensed consolidated financial statements for further discussion on our indebtedness. 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. No such gain was recorded during the nine months ended September 30, 2022. Income Taxes. For the nine months ended September 30, 2022, we recorded an income tax expense of $0.8 million primarily related to increased taxable income. For the nine months ended September 30, 2021, we recorded an income tax expense of $1.2 million primarily driven by foreign taxes. Consolidating Condensed Financial Information On December 21, 2017, Par Petroleum, LLC (the “Issuer”) issued its 7.75% Senior Secured Notes due 2025 in a private offering under Rule 144A and Regulation S of the Securities Act. On January 11, 2019, the Issuers (defined below) entered into a term loan and guaranty agreement with Goldman Sachs Bank USA, as administrative agent, and the lenders party thereto with respect to a $250.0 million term loan (the “Term Loan B”). On June 5, 2020, the Issuers issued their 12.875% Senior Secured Notes due 2026 in a private offering under Rule 144A and Regulation S of the Securities Act. The 7.75% Senior Secured Notes, the Term Loan B, and the 12.875% Senior Secured Notes were co-issued by Par Petroleum Finance Corp. (together with the Issuer, the “Issuers”), which has no independent assets or operations. The 7.75% Senior Secured Notes, Term Loan B, and 12.875% Senior Secured Notes are guaranteed on a senior unsecured basis only as to payment of principal and interest by Par Pacific Holdings, Inc. (the “Parent”) and are guaranteed on a senior secured basis by all of the subsidiaries of Par Petroleum, LLC. The following supplemental condensed consolidating financial information reflects (i) the Parent’s separate accounts, (ii) Par Petroleum, LLC and its consolidated subsidiaries’ accounts (which are all guarantors of the 7.75% Senior Secured Notes, Term Loan B, and 12.875% Senior Secured Notes), (iii) the accounts of subsidiaries of the Parent that are not guarantors of the 7.75% Senior Secured Notes, Term Loan B, or 12.875% Senior Secured Notes and consolidating adjustments and eliminations, and (iv) the Parent’s consolidated accounts for the dates and periods indicated. For purposes of the following condensed consolidating information, the Parent’s investment in its subsidiaries is accounted for under the equity method of accounting (dollar amounts in thousands). 43 As of September 30, 2022 Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries ASSETS Current assets Cash and cash equivalents $ 6,308 $ 402,753 $ 29 $ 409,090 Restricted cash 331 3,670 — 4,001 Trade accounts receivable — 287,719 3 287,722 Inventories — 914,622 — 914,622 Prepaid and other current assets 2,397 120,735 (3) 123,129 Due from related parties 109,025 — (109,025) — Total current assets 118,061 1,729,499 (108,996) 1,738,564 Property, plant, and equipment Property, plant, and equipment 20,199 1,182,897 3,955 1,207,051 Less accumulated depreciation and amortization (15,503) (356,529) (3,075) (375,107) Property, plant, and equipment, net 4,696 826,368 880 831,944 Long-term assets Operating lease right-of-use assets 2,810 319,058 — 321,868 Investment in subsidiaries 502,915 — (502,915) — Intangible assets, net — 14,240 — 14,240 Goodwill — 124,607 2,598 127,205 Other long-term assets 723 86,755 (14,195) 73,283 Total assets $ 629,205 $ 3,100,527 $ (622,628) $ 3,107,104 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Current maturities of long-term debt $ — $ 10,918 $ — $ 10,918 Obligations under inventory financing agreements — 864,051 — 864,051 Accounts payable 2,905 196,262 1,480 200,647 Accrued taxes 35 36,298 — 36,333 Operating lease liabilities 524 47,382 — 47,906 Other accrued liabilities 521 560,933 368 561,822 Due to related parties 74,819 108,875 (183,694) — Total current liabilities 78,804 1,824,719 (181,846) 1,721,677 Long-term liabilities Long-term debt, net of current maturities — 496,870 — 496,870 Due to related parties — — — — Finance lease liabilities — 11,202 (4,430) 6,772 Operating lease liabilities 3,509 278,147 — 281,656 Other liabilities — 39,849 13,388 53,237 Total liabilities 82,313 2,650,787 (172,888) 2,560,212 Commitments and contingencies Stockholders’ equity Preferred stock — — — — Common stock 601 — — 601 Additional paid-in capital 829,195 409,686 (409,686) 829,195 Accumulated earnings (deficit) (285,406) 38,249 (38,249) (285,406) Accumulated other comprehensive income (loss) 2,502 1,805 (1,805) 2,502 Total stockholders’ equity 546,892 449,740 (449,740) 546,892 Total liabilities and stockholders’ equity $ 629,205 $ 3,100,527 $ (622,628) $ 3,107,104 44 As of December 31, 2021 Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries ASSETS Current assets Cash and cash equivalents $ 4,086 $ 108,105 $ 30 $ 112,221 Restricted cash 330 3,670 — 4,000 Trade accounts receivable — 195,104 4 195,108 Inventories — 790,317 — 790,317 Prepaid and other current assets 15,664 12,864 (3) 28,525 Due from related parties 94,676 — (94,676) — Total current assets 114,756 1,110,060 (94,645) 1,130,171 Property, plant, and equipment Property, plant, and equipment 19,535 1,156,906 3,956 1,180,397 Less accumulated depreciation and amortization (13,869) (307,091) (2,932) (323,892) Property, plant, and equipment, net 5,666 849,815 1,024 856,505 Long-term assets Operating lease right-of-use assets 3,280 380,544 — 383,824 Investment in subsidiaries 207,483 — (207,483) — Intangible assets, net — 16,234 — 16,234 Goodwill — 124,664 2,598 127,262 Other long-term assets 724 57,382 (1,851) 56,255 Total assets $ 331,909 $ 2,538,699 $ (300,357) $ 2,570,251 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Current maturities of long-term debt $ — $ 10,841 $ — $ 10,841 Obligations under inventory financing agreements — 737,704 — 737,704 Accounts payable 1,386 151,676 1,481 154,543 Accrued taxes 48 28,593 — 28,641 Operating lease liabilities 608 53,032 — 53,640 Other accrued liabilities 9,805 360,246 373 370,424 Due to related parties 50,195 10,261 (60,456) — Total current liabilities 62,042 1,352,353 (58,602) 1,355,793 Long-term liabilities Long-term debt, net of current maturities — 553,717 — 553,717 Finance lease liabilities 17 12,192 (4,518) 7,691 Operating lease liabilities 4,150 330,944 — 335,094 Other liabilities — 63,098 (10,842) 52,256 Total liabilities 66,209 2,312,304 (73,962) 2,304,551 Commitments and contingencies Stockholders’ equity Preferred stock — — — — Common stock 602 — — 602 Additional paid-in capital 821,713 409,686 (409,686) 821,713 Accumulated earnings (deficit) (559,117) (185,096) 185,096 (559,117) Accumulated other comprehensive income (loss) 2,502 1,805 (1,805) 2,502 Total stockholders’ equity 265,700 226,395 (226,395) 265,700 Total liabilities and stockholders’ equity $ 331,909 $ 2,538,699 $ (300,357) $ 2,570,251 45 Three Months Ended September 30, 2022 Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries Revenues $ — $ 2,056,252 $ 33 $ 2,056,285 Operating expenses Cost of revenues (excluding depreciation) — 1,642,626 — 1,642,626 Operating expense (excluding depreciation) — 88,329 — 88,329 Depreciation and amortization 517 24,561 47 25,125 Loss (gain) on sale of assets, net — (185) — (185) General and administrative expense (excluding depreciation) 5,213 11,006 — 16,219 Acquisition and integration costs — — — — Total operating expenses 5,730 1,766,337 47 1,772,114 Operating income (loss) (5,730) 289,915 (14) 284,171 Other income (expense) Interest expense and financing costs, net 15 (16,958) 91 (16,852) Debt extinguishment and commitment costs — 343 — 343 Other income (expense), net (8) (191) 1 (198) Equity earnings (losses) from subsidiaries 273,119 — (273,119) — Total other income (expense), net 273,126 (16,806) (273,027) (16,707) Income (loss) before income taxes 267,396 273,109 (273,041) 267,464 Income tax benefit (expense) (1) — (66,917) 66,849 (68) Net income (loss) $ 267,396 $ 206,192 $ (206,192) $ 267,396 Adjusted EBITDA $ (5,221) $ 219,247 $ 34 $ 214,060 46 Three Months Ended September 30, 2021 Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries Revenues $ — $ 1,310,357 $ 11 $ 1,310,368 Operating expenses Cost of revenues (excluding depreciation) — 1,098,422 — 1,098,422 Operating expense (excluding depreciation) — 78,059 — 78,059 Depreciation and amortization 571 22,999 48 23,618 Loss (gain) on sale of assets, net — 2 — 2 General and administrative expense (excluding depreciation) 3,098 9,375 — 12,473 Acquisition and integration costs 1 — — 1 Total operating expenses 3,670 1,208,857 48 1,212,575 Operating income (loss) (3,670) 101,500 (37) 97,793 Other income (expense) Interest expense and financing costs, net (7) (15,462) 95 (15,374) Debt extinguishment and commitment costs — (9) — (9) Other income (expense), net (14) (8) — (22) Equity earnings (losses) from subsidiaries 85,502 — (85,502) — Total other income (expense), net 85,481 (15,479) (85,407) (15,405) Income (loss) before income taxes 81,811 86,021 (85,444) 82,388 Income tax benefit (expense) (1) (9) (21,385) 20,808 (586) Net income (loss) $ 81,802 $ 64,636 $ (64,636) $ 81,802 Adjusted EBITDA $ (3,112) $ 61,326 $ 11 $ 58,225 47 Nine Months Ended September 30, 2022 Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries Revenues $ — $ 5,512,816 $ 94 $ 5,512,910 Operating expenses Cost of revenues (excluding depreciation) — 4,801,800 — 4,801,800 Operating expense (excluding depreciation) — 252,075 — 252,075 Depreciation and amortization 1,721 72,624 143 74,488 Loss (gain) on sale of assets, net 27 (197) — (170) General and administrative expense (excluding depreciation) 14,147 33,403 — 47,550 Acquisition and integration costs 63 — — 63 Total operating expenses 15,958 5,159,705 143 5,175,806 Operating income (loss) (15,958) 353,111 (49) 337,104 Other income (expense) Interest expense and financing costs, net 6 (51,683) 277 (51,400) Debt extinguishment and commitment costs — (5,329) — (5,329) Other income (expense), net (12) (138) 1 (149) Equity earnings (losses) from subsidiaries 295,434 — (295,434) — Total other income (expense), net 295,428 (57,150) (295,156) (56,878) Income (loss) before income taxes 279,470 295,961 (295,205) 280,226 Income tax benefit (expense) (1) — (72,616) 71,860 (756) Net income (loss) $ 279,470 $ 223,345 $ (223,345) $ 279,470 Adjusted EBITDA $ (13,808) $ 482,250 $ 95 $ 468,537 48 Nine Months Ended September 30, 2021 Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries Revenues $ — $ 3,416,538 $ 35 $ 3,416,573 Operating expenses Cost of revenues (excluding depreciation) — 3,184,583 — 3,184,583 Operating expense (excluding depreciation) — 221,785 (717) 221,068 Depreciation and amortization 1,855 68,000 191 70,046 Loss (gain) on sale of assets, net — (10,637) (53,763) (64,400) General and administrative expense (excluding depreciation) 9,307 27,252 — 36,559 Acquisition and integration costs 87 — — 87 Total operating expenses 11,249 3,490,983 (54,289) 3,447,943 Operating income (loss) (11,249) (74,445) 54,324 (31,370) Other income (expense) Interest expense and financing costs, net (2,501) (48,433) 223 (50,711) Debt extinguishment and commitment costs — (6,728) (1,416) (8,144) Gain on curtailment of pension obligation — 2,032 — 2,032 Other income (expense), net (27) 30 — 3 Equity earnings (losses) from subsidiaries (75,580) — 75,580 — Total other income (expense), net (78,108) (53,099) 74,387 (56,820) Income (loss) before income taxes (89,357) (127,544) 128,711 (88,190) Income tax benefit (expense) (1) (26) 30,143 (31,310) (1,193) Net income (loss) $ (89,383) $ (97,401) $ 97,401 $ (89,383) Adjusted EBITDA $ (9,334) $ 107,175 $ 752 $ 98,593 ________________________________________ (1) The income tax benefit (expense) of the Parent Guarantor and Issuer and Subsidiaries is determined using the separate return method. The Non-Guarantor Subsidiaries and Eliminations column includes tax benefits recognized at the Par consolidated level that are primarily associated with changes to the consolidated valuation allowance and other deferred tax balances. 49 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, 2022 Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries Net income (loss) $ 267,396 $ 206,192 $ (206,192) $ 267,396 Inventory valuation adjustment — (91,135) — (91,135) RINs mark-to-market adjustments — (6,731) — (6,731) Unrealized loss on derivatives — 3,004 — 3,004 Acquisition and integration costs — — — — Debt extinguishment and commitment costs — (343) — (343) Severance costs — 9 — 9 Loss (gain) on sale of assets, net — (185) — (185) Depreciation and amortization 517 24,561 47 25,125 Interest expense and financing costs, net (15) 16,958 (91) 16,852 Equity losses (income) from subsidiaries (273,119) — 273,119 — Income tax expense (benefit) — 66,917 (66,849) 68 Adjusted EBITDA (1) $ (5,221) $ 219,247 $ 34 $ 214,060 Three Months Ended September 30, 2021 Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries Net income (loss) $ 81,802 $ 64,636 $ (64,636) $ 81,802 Inventory valuation adjustment — 2,784 — 2,784 LIFO liquidation adjustment — (4,151) — (4,151) RINs mark-to-market adjustments — (72,087) — (72,087) Unrealized loss on derivatives — 10,228 — 10,228 Acquisition and integration costs 1 — — 1 Debt extinguishment and commitment costs — 9 — 9 Severance costs — 59 — 59 Loss (gain) on sale of assets, net — 2 — 2 Depreciation and amortization 571 22,999 48 23,618 Interest expense and financing costs, net 7 15,462 (95) 15,374 Equity losses (income) from subsidiaries (85,502) — 85,502 — Income tax expense (benefit) 9 21,385 (20,808) 586 Adjusted EBITDA (1) $ (3,112) $ 61,326 $ 11 $ 58,225 50 Nine Months Ended September 30, 2022 Parent Guarantor Issuer and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries Net income (loss) $ 279,470 $ 223,345 $ (223,345) $ 279,470 Inventory valuation adjustment — (18,039) — (18,039) RINs mark-to-market adjustments — 83,119 — 83,119 Unrealized loss (gain) on derivatives — (10,151) — (10,151) Acquisition and integration costs 63 — — 63 Debt extinguishment and commitment costs — 5,329 — 5,329 Severance costs 351 1,921 — 2,272 Loss (gain) on sale of assets, net 27 (197) — (170) Depreciation and amortization 1,721 72,624 143 74,488 Interest expense and financing costs, net (6) 51,683 (277) 51,400 Equity losses (income) from subsidiaries (295,434) — 295,434 — Income tax expense (benefit) — 72,616 (71,860) 756 Adjusted EBITDA (1) $ (13,808) $ 482,250 $ 95 $ 468,537 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 — 55,527 — 55,527 RINs mark-to-market adjustments — 58,973 — 58,973 Unrealized loss on derivatives — 7,620 — 7,620 Acquisition and integration costs 87 — — 87 Debt extinguishment and commitment costs — 6,728 1,416 8,144 Severance costs — 75 — 75 Loss (gain) on sale of assets, net — (10,637) (53,763) (64,400) Depreciation and amortization 1,855 68,000 191 70,046 Interest expense and financing costs, net 2,501 48,433 (223) 50,711 Equity losses (income) from subsidiaries 75,580 — (75,580) — Income tax expense (benefit) 26 (30,143) 31,310 1,193 Adjusted EBITDA (1) $ (9,334) $ 107,175 $ 752 $ 98,593 ________________________________________ (1) For the three and nine months ended September 30, 2022 and 2021, there was no change in valuation allowance and other deferred tax items, change in value of common stock warrants, impairment expense, impairment of investment in Laramie Energy, unrealized gain on derivatives included in equity earnings from Laramie Energy, or equity losses from Laramie Energy. For the three and nine months ended September 30, 2022 and the nine months ended September 30, 2021, there was no LIFO liquidation adjustment. Liquidity and Capital Resources Our liquidity and capital requirements are primarily a function of our debt maturities and debt service requirements and contractual obligations, capital expenditures, turnaround outlays, and working capital needs. Examples of working capital needs include purchases and sales of commodities and associated margin and collateral requirements, facility maintenance costs, and other costs such as payroll. Our primary sources of liquidity are cash flows from operations, cash on hand, amounts available under our credit agreements, and access to capital markets. Our liquidity position as of September 30, 2022 was $494.7 million and consisted of $488.3 million at Par Petroleum, LLC and subsidiaries, $6.3 million at Par Pacific Holdings, and $0.1 million at all our other subsidiaries. 51 As of September 30, 2022, we had access to the ABL Credit Facility, the J. Aron Discretionary Draw Facility, the MLC receivable advances, and cash on hand of $409.1 million. In addition, we have the Supply and Offtake Agreement with J. Aron and the Washington Refinery Intermediation Agreement, which are used to finance the majority of the inventory at our Hawaii and Washington refineries, respectively. Generally, the primary uses of our capital resources have been in the operations of our refining and retail segments, payments related to acquisitions, and to repay or refinance indebtedness. 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 acquisitions and any other significant changes to our business or to refinance existing debt. We cannot offer any assurances that such capital will be available in sufficient amounts or at an acceptable cost. We may from time to time seek to retire or repurchase our 7.75% Senior Secured Notes, our 12.875% Senior Secured Notes, or our common stock through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions, or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors. The amounts involved may be material. The 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). Cash Flows The following table summarizes cash activities for the nine months ended September 30, 2022 and 2021 (in thousands): Nine Months Ended September 30, 2022 2021 Net cash provided by operating activities $ 369,053 $ 54,594 Net cash provided by (used in) investing activities (37,661) 82,356 Net cash used in financing activities (34,522) (1,954) Cash flows for the nine months ended September 30, 2022 Net cash provided by operating activities for the nine months ended September 30, 2022 was driven primarily by net income of $279.5 million, non-cash charges to operations of approximately $80.3 million, and net cash provided by changes in operating assets and liabilities of approximately $9.3 million. Non-cash charges to operations consisted primarily of the following adjustments: • depreciation and amortization expenses of $74.5 million; • stock based compensation costs of $7.4 million; and • debt commitment and extinguishment costs of $5.3 million; partially offset by • unrealized gain on derivatives contracts of $10.2 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; and • 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; and • increase in prepaid and other primarily driven by a $71.2 million increase in Advances to suppliers for crude purchases. Net cash used in investing activities for the nine months ended September 30, 2022 consisted primarily of $38.1 million in additions to property, plant, and equipment driven by profit improvement and turnaround projects including crude 52 recovery and debottlenecking projects at our Tacoma refinery, maintenance and tank replacement projects at our Wyoming refinery, and co-generation engine and tank conversion projects at our Hawaii refinery. Net cash used in financing activities was approximately $34.5 million for the nine months ended September 30, 2022 and consisted primarily of the following activities: • net repayments of debt of $72.3 million primarily driven by the partial repurchase and cancellation of our 7.75% Senior Secured Notes and 12.875% Senior Secured Notes and • repurchases of common stock of $7.3 million partially offset by • net borrowings under the J. Aron Discretionary Draw Facility and MLC receivable advances of $48.2 million. Cash flows for the nine months ended September 30, 2021 Net cash provided by operating activities was approximately $54.6 million for the nine months ended September 30, 2021, which resulted from 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, partially offset by a net loss of approximately $89.4 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 investing activities was approximately $82.4 million for the nine months ended September 30, 2021 and primarily related to proceeds received from the 2021 Hawaii sale-leaseback transactions partially offset by $21.0 million of additions to property, plant, and equipment. 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 the redemption of a portion of the 12.875% Senior Secured Notes. 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 . We and MLC entered into amendments to the Washington Refinery Intermediation Agreement on March 9, 2022, May 9, 2022, and August 11, 2022, which, among other things, increased the maximum borrowing capacity under the MLC receivable advances. Please read Note 7—Inventory Financing Agreements for more information. Supply and Offtake Agreement. We and J. Aron entered into amendments to the Supply and Offtake Agreement on April 25, 2022, and May 17, 2022, which, among other things, increased the capacity under the Discretionary Draw Facility. Please read Note 7—Inventory Financing Agreements for more information. ABL Credit Facility. On February 2, 2022, the ABL Borrowers entered into the ABL Loan Agreement with certain lenders and Bank of America, N.A., which amended and restated the first Loan and Security Agreement in its entirety. The ABL Loan Agreement was further amended on March 30, 2022. Please read Note 9—Debt for more information. Debt Repayments. During the nine months ended September 30, 2022, we repurchased and cancelled $15.0 million and $36.9 million in aggregate principal amounts of the 7.75% Senior Secured Notes and 12.875% Senior Secured Notes, respectively. Please read Note 9—Debt for more information. 53 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. 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; our expectations regarding anticipated capital expenditures, including the timing and cost of compliance with consent decrees and other enforcement actions; our expectations regarding the impact of the adoption of certain accounting standards; our estimates regarding the fair value of certain indebtedness; estimated costs to settle claims from the Delta bankruptcy; the estimated value of, and our ability to settle, legal claims remaining to be settled against third parties; our expectations regarding the synergies or other benefits of our acquisitions; our expectations regarding certain tax liabilities and debt obligations; management’s assumptions about future events; t he effects and timing of the closing of the acquisition of the ExxonMobil Billings refinery and associated marketing and logistics assets (the “Acquisition”), the anticipated cash on hand and other financing for the Acquisition and the acquisition of the hydrocarbon inventory, the anticipated synergies and other benefits of the Acquisition, including renewable growth opportunities, the anticipated financial and operating results of the Acquisition, and the effect on the Company’s cash flows and profitability (including Adjusted EBITDA and Adjusted Net Income); our ability to raise additional debt or equity capital; our ability to make strategic investments in business opportunities; and the estimates, assumptions, and projections regarding future financial condition, results of operations, liquidity, and cash flows. These and other forward-looking statements could cause the actual results, performance, or achievements of Par and its subsidiaries to differ materially from any future results, performance, or achievements expressed or implied by such forward-looking statements. Statements that are not historical fact are forward-looking statements. Forward-looking statements can be identified by, among other things, the use of forward-looking language, such as the words “plan,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “may,” “will,” “would,” “could,” “should,” “seeks,” or “scheduled to,” or other similar words, or the negative of these terms or other variations of these terms or comparable language, or by discussion of strategy or intentions. These cautionary statements are being made pursuant to the Securities Act, the Exchange Act, and the PSLRA with the intention of obtaining the benefits of the “safe harbor” provisions of such laws. The forward-looking statements contained in this Quarterly Report on Form 10-Q are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control, including those set out in our most recent Annual Report on Form 10-K and this Quarterly Report on Form 10-Q under “Risk Factors.” In addition, management’s assumptions about future events may prove to be inaccurate. All readers are cautioned that the forward-looking statements contained in this Quarterly Report on Form 10-Q are not guarantees of future performance; and we cannot assure any reader that such statements will be realized or that the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to factors described above and under Critical Accounting 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. Additionally, significant uncertainties remain with respect to COVID-19 and its economic effects. Due to the unpredictable and unprecedented nature of the COVID-19 pandemic, we cannot identify all potential risks to, and impacts on, our business, including the ultimate adverse economic impact to the Company’s business, results of operations, financial condition, and liquidity. There can be no guarantee that the operational and financial measures the Company has taken, and may take in the future, will be fully effective. We do not intend to update or revise any forward-looking statements as a result of new information, future events, or otherwise. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. 54