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Our Revenues fluctuate with refined product prices and our Cost of revenues (excluding depreciation) fluctuates with movements in crude oil and feedstock prices.
−Removed: Assuming all other factors remain constant, a $1 per barrel change in average gross refining margins, based on our throughput for the three months ended March 31, 2023 of 133 thousand barrels per day, would change annualized operating income by approximately $47.8 million.
+Added: Assuming all other factors remain constant, a $1 per barrel change in average gross refining margins, based on our throughput for the three months ended June 30, 2023 of 162 thousand bpd, would change annualized operating income by approximately $58.4 million.
This analysis may differ from actual results.
−Removed: In order to manage commodity price risks, we utilize exchange-traded futures, options, and over-the-counter (“OTC”) swaps associated with:
+Added: In order to manage commodity price risks, we utilize exchange-traded futures, OTC options, and OTC swaps associated with:
• the price for which we sell our refined products;
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All of our futures and OTC swaps are executed to economically hedge our physical commodity purchases, sales, and inventory.
−Removed: All our open futures and OTC swaps at March 31, 2023, will settle by June 2024.
−Removed: Based on our net open positions at March 31, 2023, a $1 change in the price of crude oil, assuming all other factors remain constant, would result in a change of approximately $2.0 million to the fair value of these derivative instruments and Cost of revenues (excluding depreciation).
+Added: All our open futures and OTC swaps at June 30, 2023, will settle by December 2024.
+Added: Based on our net open positions at June 30, 2023, a $1 change in the price of crude oil, assuming all other factors remain constant, would result in a
+Added: change of approximately $2.8 million to the fair value of these derivative instruments and Cost of revenues (excluding depreciation).
Our predominant variable operating cost is the cost of fuel consumed in the refining process, which is included in Cost of revenues (excluding depreciation) on our condensed consolidated statements of operations.
−Removed: For the three months ended March 31, 2023, we consumed approximately 133 thousand barrels per day of crude oil during the refining process across all our refineries.
−Removed: We internally consumed approximately 4% of this throughput in the refining process during the three months ended March 31, 2023, which is accounted for as a fuel cost.
+Added: For the three and six months ended June 30, 2023, we consumed approximately 142 thousand bpd of crude oil during the refining process across all our refineries.
+Added: We internally consumed approximately 3% of this throughput in the refining process during the three and six months ended June 30, 2023, which is accounted for as a fuel cost.
We have executed option collars to economically hedge our internally consumed fuel cost at all our refineries.
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We are exposed to market risks related to the volatility in the price of RINs required to comply with the Renewable Fuel Standard.
−Removed: Our renewable volume obligation (“RVO”) is based on a percentage of our Hawaii, Wyoming, and Washington refineries’ production of on-road transportation fuel.
+Added: Our RVO is based on a percentage of our Hawaii, Wyoming, Washington, and Montana refineries’ production of on-road transportation fuel.
The EPA sets the RVO percentages annually.
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Some of these contracts are derivative instruments, however, we elect the normal purchases normal sales exception and do not record these contracts at their fair values.
−Removed: Additionally, we are exposed to market risks related to the volatility in the price of compliance credits required to comply with Washington’s Climate Commitment Act (“Washington CCA”) and Clean Fuel Standard.
+Added: Additionally, we are exposed to market risks related to the volatility in the price of compliance credits required to comply with Washington CCA and Clean Fuel Standard.
To the extent we are unable to reduce the amount of greenhouse gas emissions in the transportation fuels we sell in Washington, we must purchase compliance credits at auction or in the open market.
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Interest Rate Risk
−Removed: As of March 31, 2023, we had $550.0 million in debt principal that was subject to floating interest rates.
+Added: As of June 30, 2023, we had $589.6 million in debt principal that was subject to floating interest rates.
We also had interest rate exposure in connection with our liabilities under the J.
−Removed: Aron Supply and Offtake Agreement and the MLC Washington Refinery Intermediation Agreement for which we pay charges based on the three-month London Interbank Offered Rate (“LIBOR”).
+Added: Aron Supply and Offtake Agreement and the MLC Washington Refinery Intermediation Agreement for which we pay charges based on the three-month London Interbank Offered Rate (“LIBOR”) and SOFR, respectively.
An increase of 1% in the variable rate on our indebtedness, after considering the instruments subject to minimum interest rates, would result in an increase to our Cost of revenues (excluding depreciation) and Interest expense and financing costs, net, of approximately $0.9 million and $8.1 million per year, respectively.
We may utilize interest rate swaps to manage our interest rate risk.
−Removed: As of March 31, 2023, we did not hold any open interest rate swaps.
−Removed: We have one contracts that references LIBOR, which terminates after LIBOR is anticipated to cease being reported in 2023.
−Removed: Our facilities that currently reference LIBOR include transition language consistent with the scheduled transition.
−Removed: We do not expect the transition away from LIBOR to have a material impact on our financial condition, results of operations, or cash flows.
+Added: As of June 30, 2023 we had entered into an interest rate collar at a cap of 5.50% and floor of 2.295%, based on the three month SOFR as of the fixing date.
+Added: This swap expires on May 31, 2026.
+Added: Please read Note 12—Derivatives for more information.
+Added: We have one contract that references LIBOR as of June 30, 2023.
+Added: Effective July 1, 2023, this facility will reference daily SOFR.
+Added: Please read Note 11—Debt for more information.
We are subject to risk of losses resulting from nonpayment or nonperformance by our counterparties.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.