PAR PACIFIC HOLDINGS, INC. 10-Q

Item 1A. RISK FACTORS We are subject to certain risks. For a discussion of these risks, see “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021. These “Risk Factors” may be amplified by the uncertain and unprecedented nature of the COVID-19 pandemic. Our business, financial condition, results of operations, and liquidity have been adversely affected by the ongoing COVID-19 pandemic that has caused, and is expected to continue to cause, the global slowdown of economic activity (including the decrease in demand for crude oil and the refined products that we produce and sell), disruptions in global supply chains, and significant volatility and disruption of financial markets and that also has adversely affected workforces, customers, and regional and local economies. Because the severity, magnitude, and duration of the COVID-19 pandemic and its economic consequences are uncertain, rapidly changing, and difficult to predict, the impact on our business, results of operations, financial condition, and liquidity remains uncertain and difficult to predict. The ultimate impact of the COVID-19 pandemic on our results of operations and financial condition continues to be uncertain and depends on numerous factors that continue to evolve, many of which are not within our control, and which we may not be able to effectively respond to, including, but not limited to: governmental, business, and individuals’ actions that have been and continue to be taken in response to the pandemic (including restrictions on travel and transport, workforce pressures and social distancing, and stay-at-home orders); the effect of the pandemic on economic activity and actions taken in response; the effect on our customers and their demand for our products; the effect of the pandemic on the creditworthiness of our customers; national or global supply chain challenges or disruption; workforce availability; facility closures; commodity cost volatility; general economic uncertainty in key global markets and financial market volatility and ability to access capital markets; global economic conditions and levels of economic growth; and the pace of recovery when the COVID-19 pandemic subsides, as well as response to a potential reoccurrence. Further, the COVID-19 pandemic, and the volatile regional and global economic conditions stemming from the pandemic, could also precipitate or aggravate the other risk factors that we identify in our 2021 Annual Report on Form 10-K, which could materially adversely affect our business, financial condition, results of operations (including revenues and profitability), and liquidity and/or stock price. Additionally, COVID-19 may also continue to affect our operating and financial results in a manner that is not presently known to us or that we currently do not consider to present significant risks to our operations. Geopolitical conflicts, including the conflict between Russia and Ukraine, could increase the cost of our crude oil feedstocks and affect the demand for our products. In February 2022, following Russia’s invasion of Ukraine, the U.S. and other countries announced sanctions against Russia, including restrictions on the importation of Russian crude oil. On March 3, 2022, we suspended purchases of Russian crude oil for our Hawaii refinery in response to the Russia-Ukraine conflict. The U.S. and other countries may impose wider sanctions and take stronger actions should the conflict further escalate. While it is difficult to predict the impact these sanctions will ultimately have on Par Pacific, any further sanctions imposed or actions taken by the U.S. or other countries, and any retaliatory measures by Russia in response, such as restrictions on energy supplies from Russia, may increase our costs, reduce our sales and earnings, or otherwise have an adverse effect on our operations. Additionally, Russia’s invasion of Ukraine and the international response to the conflict may exacerbate inflationary pressures, including with respect to commodity prices and energy costs. Rapid and significant changes in commodity costs may increase the cost of our crude oil feedstocks and affect the demand for our products. Changes in the availability of and the cost of labor could adversely affect our business. Changes in labor markets due to COVID-19 and other factors, including inflationary pressures, have increased the competition for recruiting and retaining talent. As a result of these factors, our business could be adversely impacted by increases in labor, health care, and benefits costs necessary to attract and retain high quality employees with the right skill sets to meet our needs. In addition, our wages and benefits programs may be insufficient to attract and retain top performing 57 employees, especially in a rising wage market. Any failure by us to attract, develop, retain, motivate, and maintain good relationships with qualified individuals could adversely affect our business and results of operations. The pending acquisition of the ExxonMobil Billings refinery and associated marketing and logistics assets (the “Billings Acquisition”) may not close as anticipated. The Billings Acquisition is expected to close in the second quarter of 2023, subject to the satisfaction of certain closing conditions. If these conditions are not satisfied or waived, the Billings Acquisition will not be consummated. Certain of the conditions that remain to be satisfied include, but are not limited to: • the continued accuracy of the representations and warranties contained in the Billings Acquisition purchase agreement; • the performance by each party of its obligations under the Billings Acquisition purchase agreement; • the absence of any law or timing agreement that prohibits the Billings Acquisition or makes the Billings Acquisition illegal; • the absence of any suit, action or other proceeding that seeks to prohibit the Billings Acquisition, seeks to make the Billings Acquisition illegal, or seeks substantial damages in connection with the Billings Acquisition; • the termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended; • the absence of a material adverse effect with respect to the sellers relating to the ownership, operation or maintenance of the assets to be purchased in the Billings Acquisition and the assets, condition or business of Exxon Billings Cogeneration, Inc. and Yellowstone Logistics Holding Company or the ability of the sellers to consummate the Billings Acquisition; • the operation of the Billings refinery in accordance with certain operating standards for a certain period prior to the closing date of the Billings Acquisition; • the delivery of certain carve-out financial statements related to the assets and equity interests to be acquired in the Billings Acquisition; and • the execution of certain agreements related to the consummation of the Billings Acquisition. In addition, we and the sellers can mutually agree to terminate the Billings Acquisition purchase agreement without completing the Billings Acquisition. Further, we or the sellers can unilaterally terminate the Billings Acquisition purchase agreement without the other party’s agreement and without completing the Billings Acquisition upon the occurrence of certain events. We cannot assure you that the pending Billings Acquisition will close on our expected timeframe, or at all, or close without material adjustment. We may fail to successfully integrate the assets to be acquired in the Billings Acquisition with our existing business in a timely manner, which could have a material adverse effect on our business, financial condition, results of operations, or cash flows, or we may fail to realize all of the expected benefits of the Billings Acquisition, which could negatively impact our future results of operations. Integration of the assets to be acquired in the Billings Acquisition with our existing business will be a complex, time-consuming, and costly process. A failure to successfully integrate the assets with our existing business in a timely manner may have a material adverse effect on our business, financial condition, results of operations, or cash flows. The difficulties of combining the assets with our existing operations include, among other things: • operating a larger combined organization and adding operations; • difficulties in the assimilation of the acquired assets and operations; • the diversion of management's attention from other business concerns; • integrating personnel from diverse business backgrounds and organizational cultures; • potential environmental or regulatory compliance matters or liabilities; and • coordinating and consolidating corporate and administrative functions. If we consummate the Billings Acquisition and if any of these risks or unanticipated liabilities or costs were to materialize, then any desired benefits of the Billings Acquisition may not be fully realized, if at all, and our future results of operations could be negatively impacted. In addition, the assets to be acquired in the Billings Acquisition may actually perform at levels below the forecasts we used to evaluate the assets, due to factors that are beyond our control. If the assets perform at levels below the forecasts we used to evaluate the assets, then our future results of operations could be negatively impacted. 58 Flaws in our ongoing due diligence in connection with the assets to be acquired in the Billings Acquisition could have a significant negative effect on our financial condition and results of operations. We conducted limited due diligence in connection with the Billings Acquisition prior to signing the purchase agreement with respect thereto and are continuing to conduct due diligence during the period between the signing and closing of the Billings Acquisition. Intensive due diligence is time consuming and expensive due to the operations, accounting, finance, and legal professionals who must be involved in the due diligence process and the fact that such efforts do not always lead to a consummated transaction. Diligence may not reveal all material issues that may affect the assets to be acquired in the Billings Acquisition. In addition, factors outside of our control may later arise. If, during the due diligence process, we fail to identify issues specific to the assets, we may be forced to later write down or write off assets, restructure our operations, or incur impairment or other charges that could result in other reporting losses. We cannot assure you that we will not have to take write-downs or write-offs in connection with the acquisitions of certain of the assets and assumption of certain liabilities of the assets to be acquired in the Billings Acquisition, which could have a negative effect on our financial condition and results of operations following closing.