What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-09 compared with 2023-05-05 · 447 added, 158 removed, 452 unchanged (57% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We are a growth-oriented company based in Houston, Texas, that owns and operates market-leading energy and infrastructure businesses.

We are a growing energy company based in Houston, Texas, that provides both renewable and conventional fuels to the western United States.

Our business is organized into three primary segments:

1) Refining - We own and operate three refineries with total operating throughput capacity of 155 Mbpd in Hawaii, Wyoming, and Washington.

1) Refining - We own and operate four refineries with total operating throughput capacity of 218 thousand barrels per day (“Mbpd”) in Hawaii, Wyoming, Washington, and Montana.

On June 1, 2023, we purchased a refinery in Billings, Montana that processes Western Canadian and regional Rocky Mountain crude oil and a 65% interest in an adjacent cogeneration facility.

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 March 31, 2023, we owned a 46.0% equity investment in Laramie Energy.

3) Logistics - We operate an extensive energy infrastructure 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.

On June 1, 2023, we purchased distribution and logistics assets in the upper Rockies region, including the wholly owned 70-mile, 55 Mbpd Silvertip Pipeline, a 40% interest in the 750-mile, 65 Mbpd Yellowstone refined products pipeline, and four wholly owned and three joint venture refined product terminals.

As of June 30, 2023, we owned a 46.0% equity investment in Laramie Energy.

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

As noted in the Refining and Logistics discussions above, as of June 30, 2023 through the Billings Acquisition, we own a 65% and a 40% equity investment in YELP and YPLC, respectively.

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.

Our Corporate and Other reportable segment primarily includes general and administrative costs, business development expenses associated with renewable fuel projects, and Par West redevelopment and other costs.

Please read Note 19—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

The crude oil market stabilized in the first quarter of 2023 as compared to the volatility noted in the first quarter of 2022.

The price of crude oil held relatively steady in the first quarter of this year.

Energy Administration (“EIA”) in its April 2023 short term energy outlook is forecasting average Brent crude oil pricing of $85 per barrel in 2023, reflecting the Organization of the Petroleum Exporting Countries (“OPEC”) crude oil production cut of 1.2 MMbpd through the end of 2023, as announced on April 3, 2023.

Global crude oil demand is forecasted to rise by 1.4 billion bpd in 2023.

The financial results reported in this Quarterly Report on Form 10-Q continue to reflect the rebounding demand driven by decreasing COVID-19 pandemic related demand suppression in the regions in which we operate.

Crude oil pricing decreased in the first half of 2023, compared to the volatility noted in the second half of 2022.

In the first half of 2023, Brent crude oil pricing decreased to $80 per barrel compared to $107 per barrel in the second half of 2022.

In addition, in the first half of 2023 U.S.

retail gasoline prices decreased to $3.59 per gallon compared to $4.17 per gallon in the second half of 2022.

Energy Information Administration (“EIA”) in its May 2023 short term energy outlook is forecasting average Brent crude oil pricing of $73 per barrel in 2023 due to ongoing considerations about weakening global economic conditions, perceived risk around the global banking sector, and persistent inflation.

Refined product crack spreads in the second quarter of 2023 decreased as compared to the second quarter of 2022, largely driven by the conflict between Russia and Ukraine that escalated in February 2022.

In addition, U.S retail gasoline prices are expected to decrease by 20% to $3.40 per gallon during the summer 2023 driving season (April-September) compared to summer 2022.

On April 3, 2023, the Organization of the Petroleum Exporting Countries (“OPEC”) announced a cut to crude oil production of 1.2 MMbpd through the end of 2023.

The EIA expects the drop in OPEC crude oil production and the seasonal rise in oil consumption to put upward pressure on crude oil prices.

On June 4, 2023, Saudi Arabia, the largest producer in the OPEC cartel, announced an additional 1 MMbpd cut to its production beginning with its July export program.

The Kingdom announced during early August that those cuts would be extended through the end of the year.

As a result, crude oil prices have returned to levels closer to 2022 than crude oil prices during the first half of 2023.

Please read Item 1A.

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Results of Operations

Three months ended March 31, 2023 compared to the three months ended March 31, 2022

Net Income (Loss).

Our financial results for the first quarter of 2023 improved from a net loss of $137.1 million for the three months ended March 31, 2022 to net income of $237.9 million for the three months ended March 31, 2023.

The increase was primarily driven by higher operating income of $385.2 million including a $94.7 million gain on settlement of RIN obligations and a $10.7 million distribution from Laramie Energy, partially offset by $17.7 million of costs related to our 2023 debt repayments.

Please read the discussions of segment results and consolidated results below for additional information.

Adjusted EBITDA and Adjusted Net Income (Loss).

For the three months ended March 31, 2023, Adjusted EBITDA was $167.6 million compared to $12.4 million for the three months ended March 31, 2022.

The increase was primarily related to an increase of $148.2 million in our refining segment and an increase of $9.9 million in our retail segment.

Three months ended June 30, 2023 compared to the three months ended June 30, 2022

Our financial results for the second quarter of 2023 declined from net income of $149.1 million for the three months ended June 30, 2022 to net income of $30.0 million for the three months ended June 30, 2023.

The decrease was primarily driven by a $124.7 million decrease in refining segment operating income, $7.8 million higher general and administrative expenses, and $7.3 million higher acquisition and integration expenses also related to our Billings Acquisition, partially offset by a $9.7 million improvement in our retail segment operating income.

Please read the discussions of segment and consolidated results below for additional information.

Adjusted EBITDA and Adjusted Net Income.

For the three months ended June 30, 2023, Adjusted EBITDA was $150.8 million compared to $242.1 million for the three months ended June 30, 2022.

The $91.3 million decrease was primarily related to a decrease of $99.6 million in our refining segment, partially offset by an increase of $9.9 million in our retail segment.

Please read the discussion of segment results below for additional information.

For the three months ended March 31, 2023, Adjusted Net Income was $137.5 million compared to an Adjusted Net Loss of $27.4 million for the three months ended March 31, 2022.

The improvement was primarily related to the factors described above for the increase in Adjusted EBITDA as well as our receipt of a $10.7 million distribution from Laramie Energy.

The following tables summarize our consolidated results of operations for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 (in thousands).

For the three months ended June 30, 2023, Adjusted Net Income was $105.6 million compared to an Adjusted Net Income of $197.2 million for the three months ended June 30, 2022.

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

Six months ended June 30, 2023 compared to the six months ended June 30, 2022

Our financial results improved from a net income of $12.1 million for the six months ended June 30, 2022 to net income of $267.9 million for the six months ended June 30, 2023.

The increase was driven by a $256.8 million increase in refining segment operating income and a $19.1 million increase in retail segment operating income, partially offset by a $12.4 million increase in acquisitions and integration expenses related to our Billings Acquisition, and a $11.2 million increase in general and administrative expenses.

Please read the discussions of segment and consolidated results below for additional information.

Adjusted EBITDA and Adjusted Net Income.

For the six months ended June 30, 2023, Adjusted EBITDA was $318.5 million compared to $254.5 million for the six months ended June 30, 2022.

The improvement was primarily related to an increase of $48.8 million in our refining segment, combined with an increase of $19.6 million in our retail segment, an increase of $7.6 million in our logistics segment, offset by a decrease of $11.9 million in our corporate segment.

Please read the discussion of segment results below for additional information.

For the six months ended June 30, 2023, Adjusted Net Income was $243.1 million compared to $169.9 million for the six months ended June 30, 2022.

The improvement was primarily related to the same factors described above for the increase in Adjusted EBITDA as well as our receipt of a $10.7 million distribution from Laramie Energy.

The following tables summarize our consolidated results of operations for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022 (in thousands).

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

Three Months Ended March 31,

Three Months Ended June 30,

2023 2022 $ Change % Change

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Depreciation and amortization 28,216 25,583 2,633 10%

Loss on sale of assets, net — 15 (15) (100)%

General and administrative expense (excluding depreciation) 23,168 15,438 7,730 50%

Equity earnings from refining and logistics investments (425) — (425) NM (1)

Acquisition and integration costs 7,273 — 7,273 NM (1)

Par West redevelopment and other costs 2,613 1,477 1,136 77%

Total operating expenses 1,737,494 1,932,303

Operating income 46,433 174,029

Other income (expense)

Interest expense and financing costs, net (14,909) (18,154) 3,245 (18)%

Debt extinguishment and commitment costs 38 (5,672) 5,710 101%

Other income, net 379 47 332 706%

Total other expense, net (14,492) (23,779)

Income before income taxes 31,941 150,250

Income tax expense (1,928) (1,125) (803) 71%

Net income $ 30,013 $ 149,125

Six Months Ended June 30,

2023 2022 $ Change % Change

Revenues $ 3,469,136 $ 3,456,625 $ 12,511 —%

Cost of revenues (excluding depreciation) 2,863,826 3,159,174 (295,348) (9)%

Operating expense (excluding depreciation) 184,963 160,881 24,082 15%

Depreciation and amortization 52,576 49,363 3,213 7%

Loss on sale of assets, net — 15 (15) (100)%

General and administrative expense (excluding depreciation) 42,454 31,331 11,123 36%

Equity earnings from refining and logistics investments (425) — (425) NM (1)

Acquisition and integration costs 12,544 63 12,481 19,811%

Par West redevelopment and other costs 2,750 — 2,750 NM (1)

Par West redevelopment and other costs 5,363 2,865 2,498 87%

Total operating expenses 3,161,301 3,403,692

Operating income (loss) 261,402 (121,096)

Operating income 307,835 52,933

Other income (expense)

Interest expense and financing costs, net (31,159) (34,548) 3,389 (10)%

Debt extinguishment and commitment costs (17,720) — (17,720) NM (1)

Other income (expense), net (35) 2 (37) (1,850)%

Debt extinguishment and commitment costs (17,682) (5,672) (12,010) 212%

Other income, net 344 49 295 602%

Equity earnings (losses) from Laramie Energy, LLC 10,706 — 10,706 NM (1)

Total other expense, net (37,791) (40,171)

Income (loss) before income taxes 238,103 (137,488)

Income tax benefit (expense) (213) 437 (650) (149)%

Net income (loss) $ 237,890 $ (137,051)

Income before income taxes 270,044 12,762

Income tax expense (2,141) (688) (1,453) 211%

Net income $ 267,903 $ 12,074

________________________________________________________

(1) NM - Not meaningful

The following tables summarize our operating income (loss) by segment for the three months ended March 31, 2023 and 2022 (in thousands).

The following tables summarize our operating income (loss) by segment for the three and six months ended June 30, 2023 and 2022 (in thousands).

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

Three months ended March 31, 2023 Refining Logistics Retail Corporate, Eliminations and Other (1) Total

Three months ended June 30, 2023 Refining Logistics Retail Corporate, Eliminations and Other (1) Total

Revenues $ 1,708,541 $ 64,709 $ 148,396 $ (137,719) $ 1,783,927

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General and administrative expense (excluding depreciation) — — — 23,168 23,168

Equity earnings from refining and logistics investments — (425) — — (425)

Acquisition and integration costs — — — 7,273 7,273

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Operating income (loss) $ 44,139 $ 20,691 $ 15,220 $ (33,617) $ 46,433

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

Three months ended June 30, 2022 Refining Logistics Retail Corporate, Eliminations and Other (1) Total

Revenues $ 2,044,455 $ 50,633 $ 147,211 $ (135,967) $ 2,106,332

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Depreciation and amortization 16,979 5,211 2,600 793 25,583

Loss (gain) on sale of assets, net — (12) — 27 15

General and administrative expense (excluding depreciation) — — — 15,438 15,438

Acquisition and integration costs — — — — —

Par West redevelopment and other costs 1,477 — — — 1,477

Operating income (loss) $ 168,798 $ 15,898 $ 5,525 $ (16,192) $ 174,029

________________________________________________________

(1) Includes eliminations of intersegment Revenues and Cost of revenues (excluding depreciation) of $118.2 million and $111.3 million for the three months ended March 31, 2023 and 2022, respectively.

Below is a summary of key operating statistics for the refining segment for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

(1) Includes eliminations of intersegment Revenues and Cost of revenues (excluding depreciation) of $137.7 million and $136.0 million for the three months ended June 30, 2023 and 2022, respectively.

Six months ended June 30, 2023 Refining Logistics Retail Corporate, Eliminations and Other (1) Total

Revenues $ 3,323,953 $ 117,097 $ 283,968 $ (255,882) $ 3,469,136

Cost of revenues (excluding depreciation) 2,845,275 67,087 207,396 (255,932) 2,863,826

Operating expense (excluding depreciation) 135,853 7,043 42,067 — 184,963

Depreciation and amortization 35,549 10,093 5,811 1,123 52,576

General and administrative expense (excluding depreciation) — — — 42,454 42,454

Equity earnings from refining and logistics investments — (425) — — (425)

Acquisition and integration costs — — — 12,544 12,544

Par West redevelopment and other costs — — — 5,363 5,363

Operating income (loss) $ 307,276 $ 33,299 $ 28,694 $ (61,434) $ 307,835

Six months ended June 30, 2022 Refining Logistics Retail Corporate, Eliminations and Other (1) Total

Revenues $ 3,343,678 $ 93,094 $ 267,120 $ (247,267) $ 3,456,625

Cost of revenues (excluding depreciation) 3,143,492 49,488 213,484 (247,290) 3,159,174

Operating expense (excluding depreciation) 114,536 7,570 38,775 — 160,881

Depreciation and amortization 32,312 10,298 5,291 1,462 49,363

Loss (gain) on sale of assets, net — (12) — 27 15

General and administrative expense (excluding depreciation) — — — 31,331 31,331

Acquisition and integration costs — — — 63 63

Par West redevelopment and other costs 2,865 — — — 2,865

Operating income (loss) $ 50,473 $ 25,750 $ 9,570 $ (32,860) $ 52,933

________________________________________________________

(1) Includes eliminations of intersegment Revenues and Cost of revenues (excluding depreciation) of $255.9 million and $247.3 million for the six months ended June 30, 2023 and 2022, respectively.

Below is a summary of key operating statistics for the refining segment for the three and six months ended June 30, 2023 and 2022:

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

2023 2022 2023 2022

Total Refining Segment

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Refined product sales volume (Mbpd) 87.2 80.2 88.8 79.2

On-island sales volume 90.4 78.0

Exports sales volume — —

Total refined product sales volume 90.4 78.0

Adjusted Gross Margin per bbl ($/throughput bbl) (2) $ 12.08 $ 18.71 $ 15.41 $ 11.22

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D&A per bbl ($/throughput bbl) 0.67 0.66 0.70 0.66

Montana Refinery

Feedstocks Throughput (Mbpd) (1) 62.6 — 62.6 —

Yield (% of total throughput)

Gasoline and gasoline blendstocks 46.3 % — % 46.3 % — %

Distillates 29.3 % — % 29.3 % — %

Asphalt 13.3 % — % 13.3 % — %

Other products 6.1 % — % 6.1 % — %

Total yield 95.0 % — % 95.0 % — %

Refined product sales volume (Mbpd) (1) 59.3 — 59.3 —

Adjusted Gross Margin per bbl ($/throughput bbl) (2) $ 30.98 $ — $ 30.98 $ —

Production costs per bbl ($/throughput bbl) (3) 8.07 — 8.07 —

D&A per bbl ($/throughput bbl) 1.85 — 1.85 —

Washington Refinery

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D&A per bbl ($/throughput bbl) 1.82 2.03 1.81 2.45

Three Months Ended March 31,

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

2023 2022 2023 2022

Wyoming Refinery

22 unchanged sentences

________________________________________________________

(1) Feedstocks throughput and sales volumes per day for the Montana refinery for the three and six months ended June 30, 2023 are calculated based on the 30-day period for which we owned the Montana refinery in 2023.

As such, the amounts for the total refining segment represent the sum of the Hawaii, Washington and Wyoming refineries’ throughput or sales volumes averaged over the three and six months ended June 30, 2023 plus the Montana refinery’s throughput or sales volumes averaged over the period from June 1, 2023 to June 30, 2023.

The 2022 amounts for the total refining segment represent the sum of the Hawaii, Washington and Wyoming refineries’ throughput or sales volumes averaged over the three and six months ended June 30, 2022.

(2) We calculate Adjusted Gross Margin per barrel by dividing Adjusted Gross Margin by total refining throughput.

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(5) We believe the RVO Adjusted Pacific Northwest 3-1-1-1 (or three barrels of WTI crude oil converted into one barrel of Pacific Northwest gasoline, one barrel of Pacific Northwest ULSD and one barrel of USGC VGO, less 100% of the RVO cost for gasoline and ULSD) is the most representative market indicator for our operations in Washington with improved historical correlations to our reported adjusted gross margin compared to prior reported indices.

(5) We believe the RVO Adjusted USGC 3-2-1 (or three barrels of WTI crude oil converted into two barrels of USGC gasoline and one barrel of USGC ULSD, less 100% of the RVO cost) is the most representative market indicator for our operations in Wyoming with improved historical correlations to our reported adjusted gross margin compared to prior reported indices.

(6) We believe the RVO Adjusted USGC 3-2-1 (or three barrels of WTI crude oil converted into two barrels of USGC gasoline and one barrel of USGC ULSD, less 100% of the RVO cost) is the most representative market indicator for our operations in Montana and Wyoming with improved historical correlations to our reported adjusted gross margin compared to prior reported indices.

(7) Crude pricing has been updated to reflect simple averages of outright prices during the relevant period.

Below is a summary of key operating statistics for the retail segment for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

Below is a summary of key operating statistics for the retail segment for the three and six months ended June 30, 2023 and 2022:

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

2023 2022 2023 2022

Retail Segment

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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 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.

Beginning with financial results reported for periods in fiscal year 2023, Adjusted Gross Margin, Adjusted Net Income (Loss), and Adjusted EBITDA also exclude the mark-to-market losses (gains) associated with our net obligation related to the Washington Climate Commitment Act and Clean Fuel Standard effective beginning in 2023.

3 unchanged sentences

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

Beginning with financial results report for the second quarter of 2023, Adjusted Gross Margin, Adjusted Net Income (Loss), and Adjusted EBITDA also exclude our portion of interest, taxes, and depreciation expense from our refining and logistics investments.

Adjusted Gross Margin

2 unchanged sentences

• depreciation and amortization (“D&A”);

• Par’s portion of interest, taxes, and depreciation expense from refining and logistics investments;

• impairment expense;

2 unchanged sentences

• LIFO layer liquidation impacts associated with our Washington inventory;

• Environmental obligation mark-to-market adjustment (which represents the income statement effect of reflecting our Renewable Identification Numbers (“RINs”) liability on a net basis;

• Environmental obligation mark-to-market adjustment (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 our net obligation associated with the Washington Climate Commitment Act and Clean Fuel Standard);

1 unchanged sentence

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

Three months ended March 31, 2023 Refining Logistics Retail

Three months ended June 30, 2023 Refining Logistics Retail

Operating income $ 44,139 $ 20,691 $ 15,220

2 unchanged sentences

Depreciation and amortization 19,826 5,059 2,732

Par’s portion of interest, taxes, and depreciation expense from refining and logistics investments — 207 —

Inventory valuation adjustment 33,118 — —

Environmental obligation mark-to-market adjustments 9,343 — —

Unrealized loss on derivatives 22,178 — —

Adjusted Gross Margin (1) $ 205,575 $ 29,553 $ 39,228

Three months ended June 30, 2022 Refining Logistics Retail

Operating income $ 168,798 $ 15,898 $ 5,525

Operating expense (excluding depreciation)

57,624 3,797 19,444

Depreciation and amortization 16,979 5,211 2,600

Par’s portion of interest, taxes, and depreciation expense from refining and logistics investments — — —

Gain on sale of assets, net — (12) —

Inventory valuation adjustment (7,557) — —

Environmental obligation mark-to-market adjustments 78,548 — —

Unrealized gain on derivatives (28,607) — —

Par West redevelopment and other costs 1,477 — —

Adjusted Gross Margin (1) $ 287,262 $ 24,894 $ 27,569

Three months ended March 31, 2022 Refining Logistics Retail

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

Six months ended June 30, 2023 Refining Logistics Retail

Operating income $ 307,276 $ 33,299 $ 28,694

Operating expense (excluding depreciation)

1 unchanged sentence

Depreciation and amortization 35,549 10,093 5,811

Par’s portion of interest, taxes, and depreciation expense from refining and logistics investments — 207 —

Inventory valuation adjustment 53,976 — —

2 unchanged sentences

Adjusted Gross Margin (1) $ 417,204 $ 50,642 $ 76,572

Six months ended June 30, 2022 Refining Logistics Retail

Operating income $ 50,473 $ 25,750 $ 9,570

Operating expense (excluding depreciation)

114,536 7,570 38,775

(1) For the three months ended March 31, 2023 and 2022, there was no impairment expense, loss (gain) on sale of assets, or LIFO liquidation adjustment recorded in Operating income (loss).

Depreciation and amortization 32,312 10,298 5,291

Par’s portion of interest, taxes, and depreciation expense from refining and logistics investments — — —

Gain on sale of assets, net — (12) —

Inventory valuation adjustment 73,096 — —

Environmental obligation mark-to-market adjustments 89,850 — —

Unrealized gain on derivatives (13,155) — —

Par West redevelopment and other costs 2,865 — —

Adjusted Gross Margin (1) $ 349,977 $ 43,606 $ 53,636

____________________________________________________________________________

(1) For the three and six months ended June 30, 2023 and 2022, there was no impairment expense and LIFO liquidation adjustment recorded in Operating income (loss).

For the three and six months ended June 30, 2023, there was no (gain) loss on sale of assets recorded in Operating income (loss).

Adjusted Net Income (Loss) and Adjusted EBITDA

2 unchanged sentences

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

• Environmental obligation mark-to-market adjustments (which represents the income statement effect of reflecting our Renewable Identification Numbers (“RINs”) liability on a net basis;

• Environmental obligation mark-to-market adjustments (which represents the income statement effect of reflecting our RINs liability on a net basis;

13 unchanged sentences

• 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;

• Par's portion of interest, taxes, and depreciation expense from refining and logistics investments;

• income tax expense (benefit) excluding the increase in (release of) tax valuation allowance.

The following table presents a reconciliation of Adjusted Net Income 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 March 31,

Net Income (Loss) $ 237,890 $ (137,051)

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

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

2023 2022 2023 2022

Net Income $ 30,013 $ 149,125 $ 267,903 $ 12,074

Inventory valuation adjustment 33,118 (7,557) 53,976 73,096

5 unchanged sentences

Severance costs 1,070 35 1,070 2,263

Adjusted Net Income (Loss) (1) 137,518 (27,353)

Loss on sale of assets, net — 15 — 15

Adjusted Net Income (1) 105,570 197,231 243,088 169,878

Depreciation and amortization 28,216 25,583 52,576 49,363

1 unchanged sentence

Equity earnings from Laramie Energy, LLC, excluding Par’s share of unrealized loss (gain) on derivatives — — (10,706) —

Income tax expense (benefit) 213 (437)

Par's portion of interest, taxes, and depreciation expense from refining and logistics investments 207 — 207 —

Income tax expense 1,928 1,125 2,141 688

Adjusted EBITDA (1) $ 150,830 $ 242,093 $ 318,465 $ 254,477

________________________________________

(1) For the three months ended March 31, 2023 and 2022, there was no LIFO liquidation adjustment, change in value of contingent consideration, change in value of common stock warrants, (gain) loss on sale of assets, change in valuation allowance or other deferred tax items, impairment expense, impairments associated with our investment in Laramie Energy, our share of Laramie Energy’s asset impairment losses in excess of our basis difference, or our share of Laramie Energy’s unrealized loss (gain) on derivatives.

(1) For the three and six months ended June 30, 2023 and 2022, there was no LIFO liquidation adjustment, change in value of contingent consideration, change in value of common stock warrants, change in valuation allowance or other deferred tax items, impairment expense, impairments associated with our investment in Laramie Energy, our share of Laramie Energy’s asset impairment losses in excess of our basis difference, or our share of Laramie Energy’s unrealized loss (gain) on derivatives.

Factors Impacting Segment Results

Operating Income

Three months ended March 31, 2023 compared to the three months ended March 31, 2022

Operating income for our refining segment was $263.1 million for the three months ended March 31, 2023, an increase of $381.4 million compared to a loss of $118.3 million for the three months ended March 31, 2022.

The increase was primarily driven by:

• an increase of $267.7 million related to improved crack spreads across all our refineries,

• a favorable change in the valuation of the embedded derivatives related to our inventory financing agreements driven by changes in commodity prices that resulted in a decrease in expense of $170.4 million,

• a decrease in consolidated environmental costs across all our refineries of $114.2 million, primarily associated with a gain of $94.7 million related to the settlements of a portion of our 2020 and all of our 2021 RVO liabilities, and

• an increase of $38.5 million driven by a 38% increase in refined product sales at all our refineries,

Three months ended June 30, 2023 compared to the three months ended June 30, 2022

Operating income for our refining segment was $44.1 million for the three months ended June 30, 2023, a decrease of $124.7 million compared to an income of $168.8 million for the three months ended June 30, 2022.

The decrease was primarily driven by:

• a decrease of $145.9 million related to decreased crack spreads at all our refineries,

• a decrease of $60.0 million related to an unfavorable change in crude oil differentials at our Hawaii refinery, and

• a $12.0 million unfavorable FIFO change at our Wyoming refinery,

partially offset by:

• an increase in purchased product costs of $137.0 million at our Hawaii refinery and

• a decrease of $65.0 million related to an increase in crude oil differentials at our Hawaii refinery.

Operating income for our logistics segment was $12.6 million for the three months ended March 31, 2023, an increase of $2.7 million compared to $9.9 million for the three months ended March 31, 2022.

The increase is primarily due to higher third party revenues.

Operating income for our retail segment was $13.5 million for the three months ended March 31, 2023, an increase of $9.5 million compared to $4.0 million for the three months ended March 31, 2022.

The increase was primarily due to a 43% increase in fuel margins related to higher gasoline prices in the three months ended March 31, 2023 compared to declining prices in the comparative period of 2022.

• an increase of $88.3 million related to a favorable change in the step-out obligation related to our inventory financing agreements driven by changes in commodity prices, and

• an increase of $21.6 million driven by a 17.7% increase in refined product sales across our refineries.

Operating income for our logistics segment was $20.7 million for the three months ended June 30, 2023, an increase of $4.8 million compared to $15.9 million for the three months ended June 30, 2022.

The increase is primarily due to contribution from Billings logistics assets during June 2023.

Operating income for our retail segment was $15.2 million for the three months ended June 30, 2023, an increase of $9.7 million compared to $5.5 million for the three months ended June 30, 2022.

The increase was primarily due to an increase in fuel margins, higher fuel sales volumes, and increased merchandise sales in the three months ended June 30, 2023 compared to the three months ended June 30, 2022.

Six months ended June 30, 2023 compared to the six months ended June 30, 2022

Operating income for our refining segment was $307.3 million for the six months ended June 30, 2023, an improvement of $256.8 million compared to an operating income of $50.5 million for the six months ended June 30, 2022.

The increase in profitability was primarily driven by a decrease in consolidated environmental costs across all our refineries of $216.7 million, including a $94.7 million gain on retirement of 2020 and 2021 RINs.

Other factors impacting segment results include higher refined product sales volumes and declining crack spreads.

Operating income for our logistics segment was $33.3 million for the six months ended June 30, 2023, an increase of $7.5 million compared to $25.8 million for the six months ended June 30, 2022.

The increase was primarily due to increased third party revenues and a $3.0 million contribution from the Billings Acquisition logistics assets during June 2023.

Operating income for our retail segment was $28.7 million for the six months ended June 30, 2023, an increase of $19.1 million compared to $9.6 million for the six months ended June 30, 2022.

The increase was primarily due to an increase in fuel margins, higher fuel sales volumes, and increased merchandise sales in the six months ended June 30, 2023 compared to the six months ended June 30, 2022.

Adjusted Gross Margin

Three months ended March 31, 2023 compared to the three months ended March 31, 2022

For the three months ended March 31, 2023, our refining Adjusted Gross Margin was $211.6 million, an increase of $148.9 million compared to $62.7 million for the three months ended March 31, 2022.

The increase was primarily driven by higher crack spreads partially offset by unfavorable purchased product costs as described in the refining operating income discussion above.

Adjusted Gross Margin for the Hawaii refinery increased from $3.52 per barrel during the three months ended March 31, 2022 to $19.11 per barrel during the three months ended March 31, 2023.

The improvement was primarily due to improved crack spreads and feedstock differentials, partially offset by unfavorable purchased product differentials.

Adjusted Gross Margin for the Washington refinery increased by $9.73 per barrel primarily due to improved product crack spreads and a 38% increase in sales volumes due to prior year turnaround activity, partially offset by unfavorable environmental costs, driven by Washington CCA costs.

Adjusted Gross Margin for the Wyoming refinery increased by $1.81 per barrel primarily due to favorable crack spreads partially offset by an unfavorable FIFO change of $20.0 million.

For the three months ended March 31, 2023, our logistics Adjusted Gross Margin was $21.1 million, an increase of $2.4 million compared to $18.7 million for the three months ended March 31, 2022.

The increase is primarily due to higher revenues from third party services.

For the three months ended March 31, 2023, our retail Adjusted Gross Margin was $37.3 million, an increase of $11.2 million compared to $26.1 million for the three months ended March 31, 2022.

The increase was primarily due to a 43% increase in fuel margins related to higher gasoline prices in the three months ended March 31, 2023 compared to the comparable period in 2022.

Three months ended June 30, 2023 compared to the three months ended June 30, 2022

For the three months ended June 30, 2023, our refining Adjusted Gross Margin was $205.6 million, a decrease of $81.7 million compared to $287.3 million for the three months ended June 30, 2022.

The decrease was primarily driven by decreased crack spreads and higher environmental costs across all our refineries, partially offset by margin contributed by the Montana refinery of $58.2 million.

Overall, refined product crack spreads in the second quarter of 2023 decreased as compared to the second quarter of 2022 due to the conflict between Russia and Ukraine that escalated in February 2022.

• Adjusted Gross Margin for the Hawaii refinery decreased by $6.63 per barrel from $18.71 per barrel during the three months ended June 30, 2022 to $12.08 per barrel during the three months ended June 30, 2023, primarily due to declining crack spreads and higher feedstock differentials.

The Singapore 3-1-2 index declined from $36.80 in the second quarter of 2022 to $13.72 in the second quarter of 2023.

• Adjusted Gross Margin for the Washington refinery decreased by $14.13 per barrel from $20.50 per barrel during the three months ended June 30, 2022 to $6.37 per barrel during the three months ended June 30, 2023, primarily due to declining product crack spreads, and unfavorable environmental costs of $23.3 million.

The RVO Adjusted Pacific Northwest 3-1-1-1 index declined from $47.23 in the second quarter of 2022 to $25.13 in the second quarter of 2023.

• Adjusted Gross Margin for the Wyoming refinery decreased by $22.78 per barrel from $43.34 per barrel during the three months ended June 30, 2022 to $20.56 per barrel during the three months ended June 30, 2023, primarily due to declining crack spreads and an unfavorable FIFO change of $12.0 million.

The RVO Adjusted USGC 3-2-1 index declined from $42.24 in the second quarter of 2022 to $21.65 in the second quarter of 2023.

For the three months ended June 30, 2023, our logistics Adjusted Gross Margin was $29.6 million, an increase of $4.7 million compared to $24.9 million for the three months ended June 30, 2022.

The increase is primarily due to a 4% increase in throughput across our logistics assets.

For the three months ended June 30, 2023, our retail Adjusted Gross Margin was $39.2 million, an increase of $11.6 million compared to $27.6 million for the three months ended June 30, 2022.

The increase was primarily due to an

increase in fuel margins, higher fuel sales volumes, and increased merchandise sales in the three months ended June 30, 2023 compared to the comparable period in 2022.

Six months ended June 30, 2023 compared to the six months ended June 30, 2022

For the six months ended June 30, 2023, our refining Adjusted Gross Margin was $417.2 million, an increase of $67.2 million compared to $350.0 million for the six months ended June 30, 2022.

The increase was primarily due to Adjusted Gross Margin contributed by the Montana refinery of $58.2 million.

Other factors impacting refining results are described below.

• Adjusted Gross Margin for the Hawaii refinery improved by $4.19 per barrel from $11.22 per barrel during the six months ended June 30, 2022 to $15.41 per barrel during the six months ended June 30, 2023, primarily due to higher refined products sold partially offset by lower crack spreads.

The Singapore 3-2-1 index declined from $26.56 in the six months ended June 30, 2022 to $17.45 in the six months ended June 30, 2023.

• Adjusted Gross Margin for the Washington refinery decreased by $5.51 per barrel from $14.17 per barrel during the six months ended June 30, 2022 to $8.66 per barrel during the six months ended June 30, 2023, primarily due to declining product crack spreads.

The RVO Adjusted Pacific Northwest 3-1-1-1 index declined from $35.01 in the six months ended June 30, 2022 to $25.21 in the six months ended June 30, 2023.

• Adjusted Gross Margin for the Wyoming refinery decreased by $10.92 per barrel from $34.97 per barrel during the six months ended June 30, 2022 to $24.05 per barrel during the six months ended June 30, 2023, primarily due to declining crack spreads and unfavorable FIFO changes of $32 million.

The RVO Adjusted USGS 3-2-1 index declined from $30.31 in the six months ended June 30, 2022 to $24.09 in the six months ended June 30, 2023.

For the six months ended June 30, 2023, our logistics Adjusted Gross Margin was $50.6 million, an increase of $7.0 million compared to $43.6 million for the six months ended June 30, 2022.

The increase was primarily due to increased revenues from third party services and a 10% increase in throughput across our Washington assets, partially offset by a 36% increase in cost of sales driven primarily by higher marine vessel fees and fuel costs.

For the six months ended June 30, 2023, our retail Adjusted Gross Margin was $76.6 million, an increase of $23.0 million compared to $53.6 million for the six months ended June 30, 2022.

The increase was primarily due to an increase in fuel margins, higher fuel sales volumes, and increased merchandise sales.

Discussion of Consolidated Results

Three months ended March 31, 2023 compared to the three months ended March 31, 2022

For the three months ended March 31, 2023, revenues were $1.7 billion, a $0.3 billion increase compared to $1.4 billion for the three months ended March 31, 2022.

The increase was primarily due to an increase of $0.3 billion in third-party refining segment revenue as a result of an increase in average product crack spreads, and a 22% increase in refining sales volumes at all our refineries, partially offset by decreasing crude prices in the quarter.

Average Brent crude oil prices decreased to $82.10 per barrel during the first quarter of 2023 compared to $97.90 per barrel during the first quarter of 2022, and average WTI crude oil prices decreased to $75.99 per barrel during the first quarter of 2023 compared to $95.01 per barrel during the first quarter of 2022.

Three months ended June 30, 2023 compared to the three months ended June 30, 2022

For the three months ended June 30, 2023, revenues were $1.8 billion, a $0.3 billion decrease compared to $2.1 billion for the three months ended June 30, 2022.

The decrease was primarily due to the decrease in crude prices and average product crack spreads discussed below, partially offset by a $0.2 billion contribution from the Billings Acquisition and a 4% increase in refining sales volumes across our legacy refinery portfolio during the quarter.

Average Brent crude oil prices declined 31% and average WTI crude oil prices declined 32% during the second quarter of 2023 compared to the second quarter of 2022.

The 3-1-2 Singapore Crack Spread, RVO Adjusted Pacific Northwest 3-1-1-1, and RVO Adjusted USGC 3-2-1 declined 63%, 47%, and 49%, respectively, compared to the second quarter of 2022.

Please read our key operating statistics for further information.

Revenues at our retail segment increased $15.7 million primarily due to a 4% increase in fuel prices.

Revenues at our retail segment increased $1.2 million primarily due to a 14% increase in volumes and a 13% increase in merchandise sales, partially offset by a 13% decline in fuel prices.

Cost of Revenues (Excluding Depreciation).

For the three months ended March 31, 2023, cost of revenues (excluding depreciation) was $1.3 billion, a decrease of $0.1 billion when compared to $1.4 billion for the three months ended March 31, 2022.

The decrease was primarily driven by decreased crude oil prices as described above.

For the three months ended June 30, 2023, cost of revenues (excluding depreciation) was $1.6 billion, a decrease of $0.2 billion when compared to $1.8 billion for the three months ended June 30, 2022.

The decrease was primarily driven by decreased crude oil prices as described above and lower purchased product costs, partially offset by a $0.2 billion contribution from the Billings Acquisition.

Cost of sales at our retail segment decreased $10 million primarily driven by a decrease in fuel costs.

Operating Expense (Excluding Depreciation).

For the three months ended March 31, 2023, operating expense (excluding depreciation) was $83.1 million, a $1.7 million increase when compared to $81.4 million for the three months ended March 31, 2022.

The increase in operating expenses was primarily driven by higher utility and maintenance costs and increased employee costs.

For the three months ended June 30, 2023, operating expense (excluding depreciation) was $101.8 million, a $20.9 million increase when compared to $80.9 million for the three months ended June 30, 2022.

$15.3 million of the increase was driven by the Billings Acquisition.

Additional drivers of the increase were higher utility and maintenance costs and increased employee costs.

Depreciation and Amortization .

For the three months ended March 31, 2023, D&A was $24.4 million, relatively consistent with $23.8 million for the three months ended March 31, 2022.

For the three months ended June 30, 2023, D&A was $28.2 million, an increase of $2.6 million compared to $25.6 million for the three months ended June 30, 2022.

The increase was primarily driven by the $3.5 million of D&A attributable to the Billings Acquisition.

General and Administrative Expense (Excluding Depreciation).

For the three months ended March 31, 2023, general and administrative expense (excluding depreciation) was $19.3 million, an increase of $3.4 million compared to $15.9 million for the three months ended March 31, 2022.

The increase was primarily due to an increase in employee costs and outside services related to profit improvement projects.

For the three months ended June 30, 2023, general and administrative expense (excluding depreciation) was $23.2 million, an increase of $7.8 million compared to $15.4 million for the three months ended June 30, 2022.

The increase was primarily due to an increase in employee costs, costs related to the Billings Acquisition, and renewable development activities.

Equity earnings from refining and logistics investments.

During the three months ended June 30, 2023, Equity (earnings) from refining and logistics investments were $0.4 million related to YPLC.

Please read Note 3—Refining and Logistics Equity Investments for further information.

Acquisition and Integration Expense.

During the three months ended March 31, 2023, we incurred $5.3 million of acquisition and integration costs related to the Billings Acquisition.

For the three months ended March 31, 2022, we recognized immaterial costs related to the Billings Acquisition.

Please read Note 4—Acquisitions for further discussion.

During the three months ended June 30, 2023, we incurred $7.3 million of acquisition and integration costs related to the Billings Acquisition, compared to immaterial acquisition and integration costs for the three months ended June 30, 2022.

Please read Note 5—Acquisitions for further information.

Par West redevelopment and other costs.

For the three months ended June 30, 2023, Par West redevelopment and other costs were $2.6 million, an increase of $1.1 million compared to $1.5 million for the three months ended June 30, 2022, primarily due to higher redevelopment costs.

Interest Expense and Financing Costs, Net .

For the three months ended March 31, 2023, our interest expense and financing costs were $16.3 million, relatively consistent with $16.4 million for the three months ended March 31, 2022.

For the three months ended June 30, 2023, our interest expense and financing costs were $14.9 million, a decrease of $3.3 million compared to $18.2 million for the three months ended June 30, 2022.

The decrease was primarily due to a $4.7 million increase in interest income, partially offset by an increase in interest expense due to higher outstanding debt balances.

Please read Note 9—Inventory Financing Agreements and Note 11—Debt for further information.

Debt Extinguishment and Commitment Costs.

For the three months ended March 31, 2023 we incurred $17.7 million of debt extinguishment and commitment costs in connection with the refinancing of our long-term debt.

For the three months ended June 30, 2022, our debt extinguishment and commitment costs were $5.7 million and primarily represented extinguishment costs associated with the redemption of $36.9 million of 12.875% Senior Secured Notes in second quarter of 2022.

For the three months ended June 30, 2023, debt extinguishment and commitment costs were immaterial.

Please read Note 11—Debt to our condensed consolidated financial statements for further information.

Income Taxes.

For the three months ended June 30, 2023, we recorded income tax expense of $1.9 million primarily related to increased taxable income and higher apportionment factors in the states in which we pay taxes.

For the three months ended June 30, 2022, we recorded an income tax expense of $1.1 million primarily related to increased taxable income.

Six months ended June 30, 2023 compared to the six months ended June 30, 2022

For the six months ended June 30, 2023, revenues were $3.5 billion, relatively consistent with $3.5 billion for the six months ended June 30, 2022.

The Billings Acquisition contributed revenues of $0.2 billion in the first month under our ownership.

When comparing our legacy refining operations, there was a decrease of $0.2 billion in third-party revenues at our refining segment, $0.6 billion related to lower crude oil prices, partially offset by a 12% increase in refining sales volumes across our legacy refining locations.

Average Brent crude oil prices declined 24% and average WTI crude oil prices declined 27% as compared to the prior period.

Revenues at our retail segment increased $16.9 million primarily due to an 11% increase in volumes, partially offset by a 6% decrease in fuel prices.

Revenues at our at Logistics segment increased $3.2 million primarily due to a 2% increase in Hawaii throughput.

Cost of Revenues (Excluding Depreciation).

For the six months ended June 30, 2023, cost of revenues (excluding depreciation) was $2.9 billion, a $0.3 billion decrease compared to $3.2 billion for the six months ended June 30, 2022, inclusive of a $0.2 billion contribution from the Billings Refinery.

A $0.6 billion decrease within our legacy refining portfolio was primarily due to decreases in Brent and WTI crude oil prices as discussed above, coupled with $0.3 billion lower intermediation costs and $0.2 billion lower environmental costs, partially offset by $0.2 billion related to higher refining sales volumes, $0.2 billion related to higher purchased products.

Operating Expense (Excluding Depreciation).

For the six months ended June 30, 2023, operating expense (excluding depreciation) was $185.0 million, an increase of $24.1 million compared to $160.9 million for the six months ended June 30, 2022.

The increase was primarily driven by $15.3 million attributable to the Billings Acquisition, coupled with $2.5 million higher employee costs and $2.0 million higher utility and maintenance expenses.

Depreciation and Amortization .

For the six months ended June 30, 2023, D&A was $52.6 million, an increase of $3.2 million compared to $49.4 million for the six months ended June 30, 2022.

The increase was primarily driven by the $3.5 million contribution from the Billings Acquisition.

General and Administrative Expense (Excluding Depreciation).

For the six months ended June 30, 2023, general and administrative expense (excluding depreciation) was $42.5 million, an increase of $11.2 million compared to $31.3 million for the six months ended June 30, 2022.

The increase was primarily due to an increase in employee costs, costs related to the Billings Acquisition, and renewable development activities.

Equity earnings from refining and logistics investments.

For the six months ended June 30, 2023, equity earnings from refining and logistics investments were $0.4 million.

As part of the Billings Acquisition, we acquired a 65% limited partnership ownership interest in YELP and a 40% ownership interest in YPLC.

Our proportionate share of YPLC’s net income was $0.4 million.

There was no equity earnings from YELP for the three and six months ended June 30, 2023.

Please read Note 3—Refining and Logistics Equity Investments for additional information.

Acquisition and Integration Expense.

For the six months ended June 30, 2023, we incurred $12.5 million of acquisition and integration costs and primarily related to the Billings Acquisition.

Please read Note 5—Acquisitions for further information.

Par West redevelopment and other costs.

For the six months ended June 30, 2023, Par West redevelopment and other costs were $5.4 million, an increase of $2.5 million compared to $2.9 million for the six months ended June 30, 2022, associated with the operation and decommissioning of our Par West facility.

The increase was primarily due to additional redevelopment costs of $2.3 million.

Interest Expense and Financing Costs, Net .

For the six months ended June 30, 2023, our interest expense and financing costs were $31.2 million, a decrease of $3.3 million when compared to $34.5 million for the six months ended June 30, 2022.

The decrease was primarily due to an increase in interest income of $6.9 million, partially offset by an increase in interest expense due to higher outstanding debt balances.

Debt Extinguishment and Commitment Costs.

For the six months ended June 30, 2023, we incurred debt extinguishment and commitment costs of $17.7 million in connection with the refinancing of our long-term debt in the first quarter of 2023.

Please read Note 11—Debt for further information.

For the six months ended June 30, 2022, our debt extinguishment and commitment costs were $5.7 million and primarily represented extinguishment costs associated with the redemption of $36.9 million of 12.875% Senior Secured Notes in second quarter of 2022.

Equity Earnings from Laramie Energy, LLC.

On March 1, 2023, following a refinancing of certain debt, Laramie Energy, LLC, was permitted to make a one-time cash distribution to its owners based on ownership percentage.

For the six months ended June 30, 2023, equity earnings from Laramie Energy, LLC were $10.7 million.

On March 1, 2023, following a refinancing of certain debt, Laramie Energy was permitted to make a one-time cash distribution to its owners based on ownership percentage.

Our share of this distribution was $10.7 million.

There were no equity earnings from our investment in Laramie Energy, LLC, for the three months ended March 31, 2022.

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

There were no equity earnings from our investment in Laramie Energy, LLC, for the three months ended June 30, 2023 and six months ended June 30, 2022.

Please read Note 4 — Investment in Laramie Energy for further discussion.

Income Taxes.

For the three months ended March 31, 2023, we recorded income tax expense of $0.2 million primarily related to increased taxable income.

For the three months ended March 31, 2022, we recorded an income tax benefit of $0.4 million primarily related to foreign taxes.

For the six months ended June 30, 2023, we recorded an income tax expense of $2.1 million primarily related to increased taxable income and higher apportionment factors in the states in which we pay taxes.

For the six months ended June 30, 2022, we recorded an income tax expense of $0.7 million primarily related to increased taxable income.

Consolidating Condensed Financial Information

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

As of March 31, 2023

As of June 30, 2023

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

14 unchanged sentences

Operating lease right-of-use assets 2,324 328,540 — 330,864

Refining and logistics equity investments — — 84,425 84,425

Investment in subsidiaries 657,524 — (657,524) —

75 unchanged sentences

Total liabilities and stockholders’ equity $ 730,751 $ 3,267,943 $ (718,047) $ 3,280,647

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

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

5 unchanged sentences

Depreciation and amortization 443 27,727 46 28,216

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

Loss on sale of assets, net — — — —

General and administrative expense (excluding depreciation) 8,459 14,710 (1) 23,168

Equity (earnings) from refining and logistics investments — — (425) (425)

Acquisition and integration costs (2) (5,271) 12,544 — 7,273

13 unchanged sentences

Adjusted EBITDA $ (7,942) $ 158,086 $ 686 $ 150,830

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

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

5 unchanged sentences

Depreciation and amortization 576 24,960 47 25,583

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

Loss on sale of assets, net 27 (12) — 15

General and administrative expense (excluding depreciation) 4,756 10,682 — 15,438

Acquisition and integration costs — — — —

Par West redevelopment and other costs — 1,477 — 1,477

Total operating expenses 5,359 1,926,897 47 1,932,303

Operating income (5,359) 179,387 1 174,029

Other income (expense)

Interest expense and financing costs, net (4) (18,242) 92 (18,154)

Debt extinguishment and commitment costs — (5,672) — (5,672)

Other income (expense), net 3 44 — 47

Equity earnings (losses) from subsidiaries 154,484 — (154,484) —

Total other income (expense), net 154,483 (23,870) (154,392) (23,779)

Income (loss) before income taxes 149,124 155,517 (154,391) 150,250

Income tax benefit (expense) (1) — (38,096) 36,971 (1,125)

Net income (loss) $ 149,124 $ 117,421 $ (117,420) $ 149,125

Adjusted EBITDA $ (4,753) $ 246,798 $ 48 $ 242,093

Six Months Ended June 30, 2023

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

and Subsidiaries

Revenues $ — $ 3,469,072 $ 64 $ 3,469,136

Operating expenses

Cost of revenues (excluding depreciation) — 2,863,826 — 2,863,826

Operating expense (excluding depreciation) — 184,963 — 184,963

Depreciation and amortization 816 51,666 94 52,576

Loss on sale of assets, net — — — —

General and administrative expense (excluding depreciation) 14,309 28,146 (1) 42,454

Equity (earnings) from refining and logistics investments — — (425) (425)

Acquisition and integration costs — 12,544 — 12,544

Par West redevelopment and other costs — 5,363 — 5,363

Total operating expenses 15,125 3,146,508 (332) 3,161,301

Operating income (loss) (15,125) 322,564 396 307,835

1 unchanged sentence

Interest expense and financing costs, net (26) (31,315) 182 (31,159)

Debt extinguishment and commitment costs — (17,682) — (17,682)

Other income (expense), net 34 310 — 344

Equity earnings (losses) from subsidiaries 283,933 — (283,933) —

Equity earnings from Laramie Energy, LLC — — 10,706 10,706

Total other income (expense), net 283,941 (48,687) (273,045) (37,791)

3 unchanged sentences

Adjusted EBITDA $ (13,799) $ 331,567 $ 697 $ 318,465

Six Months Ended June 30, 2022

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

and Subsidiaries

Revenues $ — $ 3,456,564 $ 61 $ 3,456,625

Operating expenses

Cost of revenues (excluding depreciation) — 3,159,174 — 3,159,174

Operating expense (excluding depreciation) — 160,881 — 160,881

Depreciation and amortization 1,204 48,063 96 49,363

Loss on sale of assets, net 27 (12) — 15

General and administrative expense (excluding depreciation) 8,934 22,397 — 31,331

Acquisition and integration costs 63 — — 63

Par West redevelopment and other costs — 2,865 — 2,865

Total operating expenses 10,228 3,393,368 96 3,403,692

Operating income (10,228) 63,196 (35) 52,933

Other income (expense)

Interest expense and financing costs, net (9) (34,725) 186 (34,548)

Debt extinguishment and commitment costs — (5,672) — (5,672)

Other income (expense), net (4) 53 — 49

Equity earnings (losses) from subsidiaries 22,315 — (22,315) —

Total other income (expense), net 22,302 (40,344) (22,129) (40,171)

Income (loss) before income taxes 12,074 22,852 (22,164) 12,762

Income tax benefit (expense) (1) — (5,699) 5,011 (688)

Net income (loss) $ 12,074 $ 17,153 $ (17,153) $ 12,074

Adjusted EBITDA $ (8,587) $ 263,003 $ 61 $ 254,477

________________________________________

(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.

(2) The acquisition and integration expense related to the Billings Acquisition was pushed down from the Parent Guarantor to the Issuer and Subsidiaries upon consummation of the transaction.

Non-GAAP Financial Measures

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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 March 31, 2023

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

Three Months Ended June 30, 2023

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

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Environmental obligation mark-to-market adjustments — 9,343 — 9,343

Unrealized loss (gain) on derivatives — (13,670) — (13,670)

Unrealized loss on derivatives — 22,178 — 22,178

Acquisition and integration costs (5,271) 12,544 — 7,273

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Severance costs 476 594 — 1,070

Par’s share of Laramie Energy’s unrealized loss (gain) on derivatives (2) — — — —

Depreciation and amortization 443 27,727 46 28,216

Interest expense and financing costs, net 18 14,982 (91) 14,909

Equity earnings from Laramie Energy, LLC, excluding Par’s share of unrealized loss (gain) on derivatives — — (10,706) (10,706)

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

Equity losses (income) from subsidiaries (34,389) — 34,389 —

Par's portion of interest, taxes, and depreciation expense from refining and logistics investments — — 207 207

Income tax expense (benefit) 768 8,820 (7,660) 1,928

Adjusted EBITDA (1) $ (7,942) $ 158,086 $ 686 $ 150,830

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

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

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Environmental obligation mark-to-market adjustments — 78,548 — 78,548

Unrealized loss (gain) on derivatives — (28,607) — (28,607)

Acquisition and integration costs — — — —

Debt extinguishment and commitment costs — 5,672 — 5,672

Severance costs — 35 — 35

Loss on sale of assets, net 27 (12) — 15

Depreciation and amortization 576 24,960 47 25,583

Interest expense and financing costs, net 4 18,242 (92) 18,154

Equity losses (income) from subsidiaries (154,484) — 154,484 —

Income tax expense (benefit) — 38,096 (36,971) 1,125

Adjusted EBITDA (1) $ (4,753) $ 246,798 $ 48 $ 242,093

Six Months Ended June 30, 2023

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

and Subsidiaries

Net income (loss) $ 267,903 $ 206,517 $ (206,517) $ 267,903

Inventory valuation adjustment — 53,976 — 53,976

Environmental obligation mark-to-market adjustments — (123,958) — (123,958)

Unrealized loss on derivatives — 8,508 — 8,508

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Severance costs 476 594 — 1,070

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

Depreciation and amortization 816 51,666 94 52,576

Interest expense and financing costs, net 26 31,315 (182) 31,159

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

Equity earnings from Laramie Energy, LLC, excluding Par’s share of unrealized loss (gain) on derivatives — — (10,706) (10,706)

Equity losses (income) from subsidiaries (283,933) — 283,933 —

Par's portion of interest, taxes, and depreciation expense from refining and logistics investments — — 207 207

Income tax expense 913 67,360 (66,132) 2,141

Adjusted EBITDA (1) $ (13,799) $ 331,567 $ 697 $ 318,465

Six Months Ended June 30, 2022

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

and Subsidiaries

Net income (loss) $ 12,074 $ 17,153 $ (17,153) $ 12,074

Inventory valuation adjustment — 73,096 — 73,096

Environmental obligation mark-to-market adjustments — 89,850 — 89,850

Unrealized loss (gain) on derivatives — (13,155) — (13,155)

Acquisition and integration costs 63 — — 63

Debt extinguishment and commitment costs — 5,672 — 5,672

Severance costs 351 1,912 — 2,263

Loss on sale of assets, net 27 (12) — 15

Depreciation and amortization 1,204 48,063 96 49,363

Interest expense and financing costs, net 9 34,725 (186) 34,548

Equity losses (income) from subsidiaries (22,315) — 22,315 —

Income tax expense (benefit) — 5,699 (5,011) 688

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________________________________________

(1) For the three months ended March 31, 2023 and 2022, there was no LIFO liquidation adjustment, change in value of contingent consideration, change in value of common stock warrants, (gain) loss on sale of assets, change in valuation allowance or other deferred tax items, impairment expense, impairments associated with our investment in Laramie Energy, or our share of Laramie Energy’s asset impairment losses in excess of our basis difference.

For the three and six months ended June 30, 2022, there was no Par’s portion of interest, taxes, and depreciation expense from refining and logistics investments.

Liquidity and Capital Resources

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

Our liquidity position as of March 31, 2023 was $750.5 million and consisted of $744.3 million at Par Petroleum, LLC and subsidiaries, $6.1 million at Par Pacific Holdings, Inc., and $0.1 million at all our other subsidiaries.

As of March 31, 2023, we had access to the ABL Credit Facility, the J.

Our liquidity position as of June 30, 2023 was $464.4 million and consisted of $457.1 million at Par Petroleum, LLC and subsidiaries, $7.2 million at Par Pacific Holdings, Inc., and $0.1 million at all our other subsidiaries.

As of June 30, 2023, we had access to the ABL Credit Facility, the J.

Aron Discretionary Draw Facility, the MLC receivable advances, and cash on hand of $191.0 million.

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

We expect to close the Billings Acquisition in the second quarter of 2023;

On June 1, 2023 we closed the Billings Acquisition;

please read Note 5—Acquisitions for further information.

On April 26, 2023, we terminated the ABL Revolver and entered into a new ABL Credit Agreement.

Please read Note 19—Subsequent Events for further information about the ABL Credit Agreement.

On April 26, 2023, we terminated the Prior ABL Credit Facility with certain lenders and Bank of America and entered into a new ABL Credit Facility.

Please read Note 11—Debt for further information about the ABL Credit Facility.

On July 26, 2023, we entered into a new LC Facility.

Please read Note 20—Subsequent Events for further information about the LC Facility.

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.

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The amounts involved may be material.

The Term Loan Credit Agreement 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 net leverage ratio (as defined in the Term Loan Credit Agreement).

The following table summarizes cash activities for the three months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended March 31,

Net cash provided by (used in) operating activities $ 139,095 $ (7,685)

The Term Loan Credit Agreement 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 net leverage ratio (as defined in the Term Loan Credit Agreement).

The following table summarizes cash activities for the six months ended June 30, 2023 and 2022 (in thousands):

Six Months Ended June 30,

Net cash provided by operating activities $ 312,240 $ 27,657

Net cash used in investing activities (626,021) (28,952)

Net cash provided by financing activities 13,812 75,252

Cash flows for the three months ended March 31, 2023

Net cash provided by operating activities for the three months ended March 31, 2023 was driven primarily by net income of $237.9 million, non-cash charges to operations and non-operating items of approximately $21.0 million, and net cash used for changes in operating assets and liabilities of approximately $119.8 million.

Cash flows for the six months ended June 30, 2023

Net cash provided by operating activities for the six months ended June 30, 2023 was driven primarily by net income of $267.9 million, non-cash charges to operations and non-operating items of approximately $76.1 million, and net cash used for changes in operating assets and liabilities of approximately $31.8 million.

Non-cash charges to operations and non-operating items consisted primarily of the following adjustments:

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• debt commitment and extinguishment costs of $17.7 million,

• unrealized loss on derivatives contracts of $7.6 million, and

• stock based compensation costs of $6.1 million,

partially offset by:

• unrealized gain on derivatives contracts of $13.7 million;

• gain of $10.7 million from our equity investment in Laramie Energy, LLC.

• gain of $10.7 million from our equity investment in Laramie Energy.

Net cash used for changes in operating assets and liabilities resulted primarily from:

• a decrease in gross environmental credit obligations primarily related to retirements of a portion of our 2020 and all our 2021 RVO liabilities across all our refineries, partially offset by increased obligations related to the Washington CCA and increased gross RVO primarily related to current period production volumes;

• net decreases in our inventories and accounts receivable resulting from retirements of RINs across all our refineries, lower crude oil and refined product prices and lower inventory volumes at our Hawaii refinery;

• an increase in our accounts receivable due to the Billings Acquisition,

• a decrease in gross environmental credit obligations primarily related to retirements of a portion of our prior year obligations, partially offset by increased current period obligations

• a decrease in our inventory financing agreement obligations.

partially offset by:

• net increases in our inventory financing agreement obligations and accounts payable;

• decreases in prepaid and other expenses primarily driven by decreases in our derivative collateral.

Net cash used in investing activities for the three months ended March 31, 2023 consisted primarily of $13.2 million in additions to property, plant, and equipment driven by maintenance projects at our refineries and various profit improvement projects, including construction of a flagship retail store in Washington, improved crude processing equipment at our Hawaii refinery, co-processing unit at our Tacoma refinery, and various IT infrastructure improvements.

This was partially offset by a $10.7 million cash distribution received from Laramie Energy, LLC.

Net cash provided by financing activities was approximately $33.8 million for the three months ended March 31, 2023 and consisted primarily of the following activities:

• an increase in our and accounts payable, and

• an increase in inventory driven by Washington CCA assets, partially offset by lower crude oil and refined product prices and lower inventory volumes at our Hawaii refinery.

Net cash used in investing activities for the six months ended June 30, 2023 consisted primarily of:

• $608.2 million for the Billings Acquisition, and

• $30.7 million in additions to property, plant, and equipment driven by maintenance projects at our refineries and various profit improvement projects, including construction of a flagship retail store in Washington, improved crude processing equipment at our Hawaii refinery, a co-processing unit at our Tacoma refinery, and various IT infrastructure improvements,

partially offset by:

• a $10.7 million cash distribution received from Laramie Energy in the first quarter of 2023.

Net cash provided by financing activities was approximately $13.8 million for the six months ended June 30, 2023 and consisted primarily of the following activities:

• net borrowings of debt of $61.3 million primarily driven by the refinancing and consolidation of our debt,

• net borrowings under the J.

Aron Discretionary Draw Facility and MLC receivable advances of $22.4 million;

partially offset by:

• net repayment under the J.

Aron Discretionary Draw Facility and MLC receivable advances of $31.4 million, and

• aggregate payments of $17.9 million of deferred loan costs and debt extinguishment costs, related to our debt refinancing.

Cash flows for the three months ended March 31, 2022

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

Cash flows for the six months ended June 30, 2022

Net cash provided by operating activities for the six months ended June 30, 2022, was driven primarily by non-cash charges to operations of approximately $49.9 million and net income of $12.1 million, partially offset by net cash used for changes in operating assets and liabilities of approximately $34.3 million.

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

• depreciation and amortization expenses of $49.4 million,

• stock based compensation costs of $5.8 million, and

• debt commitment and extinguishment costs of $5.7 million,

partially offset by:

• unrealized loss on derivatives contracts of $13.2 million.

• stock based compensation costs of $3.7 million.

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

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

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

Net cash used for changes in operating assets and liabilities resulted primarily from:

• 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 $66.1 million increase in collateral posted with broker to support commodity derivative positions,

partially offset by:

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

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

Net cash used in investing activities for the three months ended March 31, 2022 consisted primarily of:

• 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.

Net cash used in investing activities for the six months ended June 30, 2022 consisted primarily of:

• $29.0 million in additions to property, plant, and equipment driven by profit improvement and turnaround projects including crude recovery and debottlenecking projects at our Tacoma refinery, maintenance projects at our Wyoming refinery, and co-generation engine and combustion projects at our Hawaii refinery.

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

Net cash provided by financing activities was approximately $75.3 million for the six months ended June 30, 2022 and consisted primarily of the following activities:

• net borrowings under the J.

Aron Discretionary Draw Facility and MLC receivable advances of $142.3 million,

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

partially offset by:

• net repayments of debt of $57.0 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 $6.5 million.

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The proceeds were used to repurchase and cancel the then-outstanding 7.75% Senior Secured Notes and 12.875% Senior Secured Notes and terminate and repay all amounts outstanding under the Term Loan B Facility .

As a result of this refinancing, our debt maturity was

extended from 2026 to 2030 and, using interest rates that were in effect at March 31, 2023, our estimated undiscounted future interest payments increased to $295 million.

As a result of this refinancing, our debt maturity was extended from 2026 to 2030 and, using interest rates that were in effect at March 31, 2023, our estimated undiscounted future interest payments increased to $295 million.

Please read Note 11—Debt for more information.

Critical Accounting Estimates

There have been no material changes to critical accounting estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

There have been no material changes to critical accounting estimates disclosed in our Annual Report on Form 10-K for the six months ended June 30, 2023.

Forward-Looking Statements

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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 expectations

regarding the impact of the adoption of certain accounting standards;

our estimates regarding the fair value of certain indebtedness;

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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 sources 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 integrate the recently acquired ExxonMobil Billings refinery and associated marketing and logistics assets (the “Acquisition”) into our existing business, the anticipated synergies and other benefits of the Acquisition, including renewable growth opportunities;

anticipated liabilities and costs associated with the Acquisition;

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;

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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.

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis