What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-08 compared with 2023-08-09 · 241 added, 230 removed, 669 unchanged (41% of the section changed)

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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.

As of September 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.

As noted in the Refining and Logistics discussions above, as of September 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:

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Recent Events Affecting Comparability of Periods

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.

Crude oil pricing decreased in 2023 compared to 2022.

In 2023, Brent crude oil pricing decreased to $84 per barrel compared to $101 per barrel in 2022.

In addition, U.S.

retail gasoline prices decreased to $3.62 per gallon in 2023 compared to $3.97 in 2022.

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

Energy Information Administration (“EIA”) in its October 2023 short term energy outlook forecasts average Brent crude oil pricing of $95 per barrel in 2024 due to lower crude oil inventories driven by Saudi Arabia’s continued voluntary crude oil production cuts.

Brent crude oil spot prices increased in the third quarter of 2023 as U.S commercial crude oil inventories fell to the lowest level since early 2022 at the end of September 2023.

In addition, the EIA forecasts that jet fuel consumption will increase by 6% in 2024 and would equal pre-pandemic 2019 consumption driven by strong return of passengers.

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.

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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.

Saudi Arabia 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 crude oil prices during the third quarter of 2023.

Please read Item 1A.

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Results of Operations

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.

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

Our financial results for the third quarter of 2023 declined from net income of $267.4 million for the three months ended September 30, 2022 to $171.4 million for the three months ended September 30, 2023.

The decrease was primarily driven by a $71.3 million decrease in refining segment operating income, $7.5 million increase in general and administrative expenses, $4.7 million increase in acquisition and integration expenses related to our Billings Acquisition, $4.5 million increase in tax expense and a $4.0 million decrease in retail segment operating income, partially offset by a $3.1 million improvement in our logistics 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.

For the three months ended September 30, 2023, Adjusted EBITDA was $255.7 million compared to $214.1 million for the three months ended September 30, 2022.

The $41.6 million increase was primarily related to an increase of $45.8 million in our refining segment, partially offset by a decrease of $3.5 million in our retail segment.

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

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.

For the three months ended September 30, 2023, Adjusted Net Income was $193.5 million compared to $172.0 million for the three months ended September 30, 2022.

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

Nine months ended September 30, 2023 compared to the nine months ended September 30, 2022

Our financial results improved from net income of $279.5 million for the nine months ended September 30, 2022 to $439.3 million for the nine months ended September 30, 2023.

The increase was driven by a $185.5 million increase in refining segment operating income and a $15.1 million increase in retail segment operating income, partially offset by an $18.5 million increase in general and administrative expenses and a $17.1 million increase in acquisitions and integration expenses related to our Billings Acquisition.

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.

For the nine months ended September 30, 2023, Adjusted EBITDA was $574.2 million compared to $468.5 million for the nine months ended September 30, 2022.

The improvement was primarily related to an increase of $94.6 million in our refining segment, an increase of $16.1 million in our retail segment and an increase of $14.2 million in our logistics segment, offset by a decrease due to an increase of $19.2 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).

For the nine months ended September 30, 2023, Adjusted Net Income was $436.6 million compared to $341.9 million for the nine months ended September 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, partially offset by a $5.9 million higher income tax expense.

The following tables summarize our consolidated results of operations for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 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 June 30,

Three Months Ended September 30,

2023 2022 $ Change % Change

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Depreciation and amortization 35,311 25,125 10,186 41%

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

General and administrative expense (excluding depreciation) 23,694 16,219 7,475 46%

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

Equity earnings from refining and logistics investments

(3,934) — (3,934) NM (1)

Acquisition and integration costs 4,669 — 4,669 NM (1)

Par West redevelopment and other costs 3,127 2,816 311 11%

Gain on sale of assets, net — (185) 185 100%

Total operating expenses 2,382,435 1,772,114

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Debt extinguishment and commitment costs — 343 (343) (100)%

Other income, net 379 47 332 706%

Other expense, net (43) (198) 155 (78)%

Total other expense, net (20,858) (16,707)

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Net income $ 171,415 $ 267,396

Six Months Ended June 30,

Nine Months Ended September 30,

2023 2022 $ Change % Change

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Depreciation and amortization 87,887 74,488 13,399 18%

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

General and administrative expense (excluding depreciation) 66,148 47,550 18,598 39%

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

Equity earnings from refining and logistics investments

(4,359) — (4,359) NM (1)

Acquisition and integration costs 17,213 63 17,150 27,222%

Par West redevelopment and other costs 8,490 5,681 2,809 49%

Gain on sale of assets, net — (170) 170 (100)%

Total operating expenses 5,543,736 5,175,806

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Debt extinguishment and commitment costs (17,682) (5,329) (12,353) 232%

Other income, net 344 49 295 602%

Other income (expense), net 301 (149) 450 302%

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

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(1) NM - Not meaningful

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 tables summarize our operating income (loss) by segment for the three and nine months ended September 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 June 30, 2023 Refining Logistics Retail Corporate, Eliminations and Other (1) Total

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

Revenues $ 2,524,155 $ 72,839 $ 158,512 $ (176,198) $ 2,579,308

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Operating income (loss) $ 194,847 $ 20,736 $ 13,315 $ (32,025) $ 196,873

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

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

Revenues $ 1,974,701 $ 54,635 $ 157,385 $ (130,436) $ 2,056,285

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Depreciation and amortization 16,542 5,059 2,865 659 25,125

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

General and administrative expense (excluding depreciation) — — — 16,219 16,219

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Par West redevelopment and other costs 2,816 — — — 2,816

Loss (gain) on sale of assets, net — (241) 56 — (185)

Operating income (loss) $ 266,091 $ 17,625 $ 17,320 $ (16,865) $ 284,171

________________________________________________________

(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

(1) Includes eliminations of intersegment Revenues and Cost of revenues (excluding depreciation) of $176.2 million and $130.4 million for the three months ended September 30, 2023 and 2022, respectively.

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

Revenues $ 5,848,108 $ 189,936 $ 442,480 $ (432,080) $ 6,048,444

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Operating income (loss) $ 502,123 $ 54,035 $ 42,009 $ (93,459) $ 504,708

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

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

Revenues $ 5,318,379 $ 147,729 $ 424,505 $ (377,703) $ 5,512,910

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Depreciation and amortization 48,854 15,357 8,156 2,121 74,488

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

General and administrative expense (excluding depreciation) — — — 47,550 47,550

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Par West redevelopment and other costs 5,681 — — — 5,681

Loss (gain) on sale of assets, net — (253) 56 27 (170)

Operating income (loss) $ 316,564 $ 43,375 $ 26,890 $ (49,725) $ 337,104

________________________________________________________

(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,

(1) Includes eliminations of intersegment Revenues and Cost of revenues (excluding depreciation) of $432.1 million and $377.7 million for the nine months ended September 30, 2023 and 2022, respectively.

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

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

2023 2022 2023 2022

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D&A per bbl ($/throughput bbl) 1.63 — 1.69 —

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

2023 2022 2023 2022

Washington Refinery

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D&A per bbl ($/throughput bbl) 1.79 2.02 1.81 2.28

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

2023 2022 2023 2022

Wyoming Refinery

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(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.

(1) Feedstocks throughput and sales volumes per day for the Montana refinery for the three and nine months ended September 30, 2023 are calculated based on the 92-day and 122-day periods for which we owned the Montana refinery in

2023, respectively.

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 nine months ended September 30, 2023 plus the Montana refinery’s throughput or sales volumes averaged over the periods from July 1, 2023 to September 30, 2023 and June 1, 2023 to September 30, 2023, respectively.

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 nine months ended September 30, 2022.

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

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(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 and six months ended June 30, 2023 and 2022:

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

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

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

2023 2022 2023 2022

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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 June 30, 2023 Refining Logistics Retail

Three months ended September 30, 2023 Refining Logistics Retail

Operating income $ 194,847 $ 20,736 $ 13,315

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Environmental obligation mark-to-market adjustments (50,153) — —

Unrealized loss on derivatives 22,178 — —

Unrealized gain on derivatives (8,995) — —

Adjusted Gross Margin (1) $ 350,570 $ 35,277 $ 38,180

Three months ended June 30, 2022 Refining Logistics Retail

Three months ended September 30, 2022 Refining Logistics Retail

Operating income $ 266,091 $ 17,625 $ 17,320

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

Gain on sale of assets, net — (12) —

Inventory valuation adjustment (91,135) — —

Environmental obligation mark-to-market adjustments (6,731) — —

Unrealized gain on derivatives (28,607) — —

Unrealized loss on derivatives 3,004 — —

Par West redevelopment and other costs 2,816 — —

Loss (gain) on sale of assets, net — (241) 56

Adjusted Gross Margin (1) $ 250,820 $ 26,153 $ 41,811

Six months ended June 30, 2023 Refining Logistics Retail

Nine months ended September 30, 2023 Refining Logistics Retail

Operating income $ 502,123 $ 54,035 $ 42,009

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Environmental obligation mark-to-market adjustments (174,111) — —

Unrealized loss on derivatives 8,508 — —

Unrealized gain on derivatives (487) — —

Adjusted Gross Margin (1) $ 767,774 $ 85,919 $ 114,752

Six months ended June 30, 2022 Refining Logistics Retail

Nine months ended September 30, 2022 Refining Logistics Retail

Operating income $ 316,564 $ 43,375 $ 26,890

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

Gain on sale of assets, net — (12) —

Inventory valuation adjustment (18,039) — —

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Par West redevelopment and other costs 5,681 — —

Loss (gain) on sale of assets, net — (253) 56

Adjusted Gross Margin (1) $ 600,797 $ 69,759 $ 95,447

____________________________________________________________________________

(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).

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

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

Adjusted Net Income (Loss) and Adjusted EBITDA

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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,

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

2023 2022 2023 2022

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Severance costs 615 9 1,685 2,272

Loss on sale of assets, net — 15 — 15

Gain on sale of assets, net — (185) — (170)

Adjusted Net Income (1) 193,501 172,015 436,589 341,893

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________________________________________

(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.

(1) For the three and nine months ended September 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 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.

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

Operating income for our refining segment was $194.8 million for the three months ended September 30, 2023, a decrease of $71.3 million compared to operating income of $266.1 million for the three months ended September 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,

• $204.0 million related to higher inventory financing costs driven by changes in commodity prices,

• $131.0 million related to decreased crack spreads at our refineries in our legacy portfolio, and

• a decrease of $52.6 million related to our derivative costs associated with our refineries in our legacy portfolio,

partially offset by:

• 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.

• an increase of $230.0 million related to a favorable change in crude oil differentials at our refineries in our legacy portfolio,

• a $69.6 million contribution from the Billings Acquisition, and

• a $24.0 million favorable FIFO change at our Wyoming refinery.

Operating income for our logistics segment was $20.7 million for the three months ended September 30, 2023, an increase of $3.1 million compared to $17.6 million for the three months ended September 30, 2022.

The increase is primarily due to a $3.1 million contribution from the Billings Acquisition logistics assets acquired in June 2023.

Operating income for our retail segment was $13.3 million for the three months ended September 30, 2023, a decrease of $4.0 million compared to $17.3 million for the three months ended September 30, 2022.

The decrease was primarily due to a $7.1 million decrease in operating income related to a decrease in fuel margins and a $0.5 million increase in operating expenses, partially offset by a $2.7 million increase related to higher fuel sales volumes, and increased merchandise sales of $1.0 million in the three months ended September 30, 2023 compared to the three months ended September 30, 2022.

Nine months ended September 30, 2023 compared to the nine months ended September 30, 2022

Operating income for our refining segment was $502.1 million for the nine months ended September 30, 2023, an improvement of $185.5 million compared to operating income of $316.6 million for the nine months ended September 30, 2022.

The increase in operating income was primarily driven by:

• a decrease in consolidated environmental costs across all our refineries in our legacy portfolio of $136.9 million, driven by favorable mark to market adjustments and a gain on retirement of prior year RINs,

• an increase of $113.3 million driven by a 29.0% increase in refined product sales volumes at our refineries in our legacy portfolio,

• an increase of $98.9 million related to a favorable change in crude oil differentials at our refineries in our legacy portfolio,

• a $53.1 million contribution from the Billings Acquisition, and

• a favorable change in step-out obligation related to our intermediation agreements of $52.6 million driven by changes in commodity prices,

partially offset by:

• an increase in purchased product costs of $201.0 million at all our refineries in our legacy portfolio,

• a decrease of $46.0 million related to declining crack spreads at our refineries in our legacy portfolio, and

• an increase in logistics and other product delivery costs of $34.9 million at our refineries in our legacy portfolio.

Operating income for our logistics segment was $54.0 million for the nine months ended September 30, 2023, an increase of $10.6 million compared to $43.4 million for the nine months ended September 30, 2022.

The increase was primarily due to a $6.2 million contribution from the Billings Acquisition logistics assets acquired in June 2023 and a $17.4 million increase in operating income driven by an increase in throughput volumes throughout our legacy logistics portfolio, an increase in third-party contracts of $3.9 million, partially offset by an increase in variable expenses of $10.3 million, an increase in vessel and fuel costs of $4.5 million and an increase in depreciation and amortization expenses of $2.4 million.

Operating income for our retail segment was $42.0 million for the nine months ended September 30, 2023, an increase of $15.1 million compared to $26.9 million for the nine months ended September 30, 2022.

The increase in operating income was primarily due to a $9.1 million increase in fuel margins, $8.2 million related to higher fuel sales volumes, and increased merchandise sales of $2.2 million, partly offset by higher operating expenses of $3.8 million driven by an increase in employee costs and credit card fees in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

Adjusted Gross Margin

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.

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

For the three months ended September 30, 2023, our refining Adjusted Gross Margin was $350.6 million, an increase of $99.8 million compared to $250.8 million for the three months ended September 30, 2022.

The increase was primarily driven by an increase of $197.6 million primarily related to lower feedstock costs across our legacy refining portfolio, Adjusted Gross Margin of $135.0 million contributed by the Montana refinery, partially offset by decreased crack spreads across our legacy refining portfolio, and higher intermediation fees.

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.

• Adjusted Gross Margin for the Hawaii refinery decreased by $6.02 per barrel from $19.49 per barrel during the three months ended September 30, 2022 to $13.47 per barrel during the three months ended September 30, 2023, primarily due to lower feedstock costs and declining crack spreads.

The Singapore 3-1-2 index declined from $26.43 in the third quarter of 2022 to $23.39 in the third quarter of 2023.

• Adjusted Gross Margin for the Washington refinery decreased by $7.67 per barrel from $19.97 per barrel during the three months ended September 30, 2022 to $12.30 per barrel during the three months ended September 30, 2023,

primarily due to unfavorable environmental costs and declining crack spreads.

The RVO Adjusted Pacific Northwest 3-1-1-1 index declined from $40.58 in the third quarter of 2022 to $35.00 in the third quarter of 2023.

• Adjusted Gross Margin for the Wyoming refinery increased by $17.62 per barrel from $19.39 per barrel during the three months ended September 30, 2022 to $37.01 per barrel during the three months ended September 30, 2023, primarily due to a favorable FIFO change of $24.0 million and 13% higher sales volumes.

The RVO Adjusted USGC 3-2-1 index improved from $29.01 in the third quarter of 2022 to $29.65 in the third quarter of 2023.

For the three months ended September 30, 2023, our logistics Adjusted Gross Margin was $35.3 million, an increase of $9.1 million compared to $26.2 million for the three months ended September 30, 2022.

The increase is primarily due to Adjusted Gross Margin of $9.0 million contributed by the Billings Acquisition logistics assets acquired in June 2023.

For the three months ended September 30, 2023, our retail Adjusted Gross Margin was $38.2 million, a decrease of $3.6 million compared to $41.8 million for the three months ended September 30, 2022.

The decrease was primarily due to a 22% decrease in fuel margins, partially offset by 12% higher fuel sales volumes and 13% higher merchandise sales margins in the three months ended September 30, 2023 compared to the comparable period in 2022.

Nine months ended September 30, 2023 compared to the nine months ended September 30, 2022

For the nine months ended September 30, 2023, our refining Adjusted Gross Margin was $767.8 million, an increase of $167.0 million compared to $600.8 million for the nine months ended September 30, 2022.

The increase was primarily due to Adjusted Gross Margin contributed by the Montana refinery of $193.2 million and 9% higher refined product sales margins across our legacy refining portfolio, partially offset by $201.0 million higher purchased product expenses, and $112.8 million higher environmental expenses.

Other factors impacting refining results are described below.

• Adjusted Gross Margin for the Hawaii refinery improved by $0.82 per barrel from $13.92 per barrel during the nine months ended September 30, 2022 to $14.74 per barrel during the nine months ended September 30, 2023, primarily due to lower feedstock costs and a 9% increase in refined product sales volumes, partially offset by $198.0 million higher purchased product costs and lower crack spreads.

The Singapore 3-2-1 index declined from $26.52 in the nine months ended September 30, 2022 to $19.45 in the nine months ended September 30, 2023.

• Adjusted Gross Margin for the Washington refinery decreased by $6.60 per barrel from $16.51 per barrel during the nine months ended September 30, 2022 to $9.91 per barrel during the nine months ended September 30, 2023, primarily due to $115.5 million higher environmental expenses and declining crack spreads.

The RVO Adjusted Pacific Northwest 3-1-1-1 index declined from $36.89 in the nine months ended September 30, 2022 to $28.51 in the nine months ended September 30, 2023.

• Adjusted Gross Margin for the Wyoming refinery remained relatively consistent, from $29.20 per barrel during the nine months ended September 30, 2022 to $28.88 per barrel during the nine months ended September 30, 2023.

The RVO Adjusted USGS 3-2-1 index declined from $29.87 in the nine months ended September 30, 2022 to $25.96 in the nine months ended September 30, 2023.

For the nine months ended September 30, 2023, our logistics Adjusted Gross Margin was $85.9 million, an increase of $16.1 million compared to $69.8 million for the nine months ended September 30, 2022.

The increase was primarily due to Adjusted Gross Margin of $12.4 million contributed from the Billings Acquisition logistics assets acquired in June 2023 and a 2% increase in throughput across our legacy assets, partially offset by an increase in cost of sales driven by $14.8 million higher fees and variable expenses.

For the nine months ended September 30, 2023, our retail Adjusted Gross Margin was $114.8 million, an increase of $19.4 million compared to $95.4 million for the nine months ended September 30, 2022.

The increase was primarily related to an 11% increase in fuel margins, 12% higher fuel sales volumes, and an 11% increase in merchandise sales.

Discussion of Consolidated Results

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.

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

For the three months ended September 30, 2023, revenues were $2.6 billion, a $0.5 billion increase compared to $2.1 billion for the three months ended September 30, 2022.

The increase was primarily due to a $0.8 billion contribution from the Billings Acquisition and a 3% increase in refining sales volumes across our legacy refinery portfolio during the quarter, partially offset by the decrease in crude prices and average product crack spreads discussed below.

Average Brent crude oil prices declined 12% and average WTI crude oil prices declined 10% during the third quarter of 2023 compared to the third 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 12%, 14%, and 2%, respectively, compared to the third quarter of 2022.

Please read our key operating statistics for further information.

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.

Revenues at our retail segment increased $1.1 million primarily due to a 12% increase in volumes and a 10% increase in merchandise sales, partially offset by an 11% decline in fuel prices.

Cost of Revenues (Excluding Depreciation).

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.

For the three months ended September 30, 2023, cost of revenues (excluding depreciation) was $2.2 billion, an increase of $0.6 billion when compared to $1.6 billion for the three months ended September 30, 2022.

The increase was primarily driven by a $0.7 billion contribution from the Billings Acquisition and higher inventory financing expenses, partially offset by decreased crude oil prices as described above and a favorable FIFO change of $0.2 billion.

Cost of sales at our retail segment increased $4.7 million primarily driven by an increase in fuel sales volumes.

Operating Expense (Excluding Depreciation).

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.

For the three months ended September 30, 2023, operating expense (excluding depreciation) was $145.2 million, a $59.7 million increase when compared to $85.5 million for the three months ended September 30, 2022.

The increase was primarily driven by the $57.7 million contribution from the Billings Acquisition.

Depreciation and Amortization .

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.

For the three months ended September 30, 2023, D&A was $35.3 million, an increase of $10.2 million compared to $25.1 million for the three months ended September 30, 2022.

The increase was primarily driven by the $11.0 million of D&A attributable to the Billings Acquisition.

General and Administrative Expense (Excluding Depreciation).

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.

For the three months ended September 30, 2023, general and administrative expense (excluding depreciation) was $23.7 million, an increase of $7.5 million compared to $16.2 million for the three months ended September 30, 2022.

The increase was primarily due to a $4.7 million increase in employee costs, a $1.3 million increase in consulting services, and $1.0 million related to the Billings Acquisition.

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.

During the three months ended September 30, 2023, Equity earnings from refining and logistics investments were $3.9 million related to YELP and YPLC.

For the three months ended ended September 30, 2023, our proportionate share of YELP’s net income and YPLC’s net income was $2.7 million and $1.5 million, respectively.

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

Acquisition and Integration Expense.

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.

During the three months ended September 30, 2023, we incurred $4.7 million of acquisition and integration costs related to the Billings Acquisition, compared to immaterial acquisition and integration costs for the three months ended September 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.

For the three months ended September 30, 2023, Par West redevelopment and other costs were $3.1 million, an increase of $0.3 million compared to $2.8 million for the three months ended September 30, 2022, primarily due to higher redevelopment costs.

Interest Expense and Financing Costs, Net .

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 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.

For the three months ended September 30, 2023, our interest expense and financing costs were $20.8 million, an increase of $3.9 million compared to $16.9 million for the three months ended September 30, 2022.

The increase was primarily due to an increase in interest expense due to higher outstanding debt balances and higher inventory financing fees.

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

For the three months ended September 30, 2023, we recorded income tax expense of $4.6 million primarily related to increased taxable income and higher apportionment factors in the states in which we pay taxes.

For the three months ended September 30, 2022, we recorded income tax expense of $0.1 million primarily related to increased taxable income.

Nine months ended September 30, 2023 compared to the nine months ended September 30, 2022

For the nine months ended September 30, 2023, revenues were $6.0 billion, a $0.5 billion increase compared to $5.5 billion for the nine months ended September 30, 2022.

The Billings Acquisition contributed revenues of $1.0 billion in the first four months under our ownership.

When comparing our legacy refining operations, there was a decrease of $0.5 billion in third-party revenues at our refining segment, $0.7 billion of which was related to lower crude oil prices, partially offset by a 9% increase in refining sales volumes.

Average Brent crude oil prices declined 20% and average WTI crude oil prices declined 21% 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.

Revenues at our retail segment increased $18.0 million primarily due to a 12% increase in volumes, partially offset by a 8% decrease in fuel prices.

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.

For the nine months ended September 30, 2023, cost of revenues (excluding depreciation) was $5.0 billion, a $0.2 billion increase compared to $4.8 billion for the nine months ended September 30, 2022, inclusive of a $0.9 billion contribution from the Billings Acquisition.

When comparing our legacy refining

operations, there was a decrease of $0.7 billion in cost of revenues (excluding depreciation), $0.8 billion of which was primarily due to decreases in crude oil prices as discussed above, $0.1 billion lower environmental costs, and $0.1 billion lower feedstock costs, partially offset by $0.3 billion related to higher refining sales volumes, and $0.2 billion related to higher purchased product costs.

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.

For the nine months ended September 30, 2023, operating expense (excluding depreciation) was $330.1 million, an increase of $83.7 million compared to $246.4 million for the nine months ended September 30, 2022.

The increase was primarily driven by $73.0 million attributable to the Billings Acquisition, coupled with $3.6 million higher employee costs and $2.8 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.

For the nine months ended September 30, 2023, D&A was $87.9 million, an increase of $13.4 million compared to $74.5 million for the nine months ended September 30, 2022.

The increase was primarily driven by the $14.5 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.

For the nine months ended September 30, 2023, general and administrative expense (excluding depreciation) was $66.1 million, an increase of $18.5 million compared to $47.6 million for the nine months ended September 30, 2022.

The increase was primarily due to an $8.9 million increase in employee costs, $4.5 million increase in outside services, and $3.1 million of expenses related to development of our renewable projects.

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.

For the nine months ended September 30, 2023, equity earnings from refining and logistics investments were $4.4 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.

For the nine months ended September 30, 2023, our proportionate share of YELP’s net income and YPLC’s net income was $2.7 million and $1.9 million, respectively.

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.

During the nine months ended September 30, 2023, we incurred $17.2 million of acquisition and integration costs related to the Billings Acquisition, compared to $0.1 million of acquisition and integration costs for the nine months ended September 30, 2022.

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.

For the nine months ended September 30, 2023, Par West redevelopment and other costs were $8.5 million, an increase of $2.8 million compared to $5.7 million for the nine months ended September 30, 2022, associated with the operation and decommissioning of our Par West facility.

The increase was primarily due to additional redevelopment costs of $3.0 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.

For the nine months ended September 30, 2023, our interest expense and financing costs were $52.0 million, relatively consistent with $51.4 million for the nine months ended September 30, 2022.

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.

For the nine months ended September 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.

For the nine months ended September 30, 2022, our debt extinguishment and commitment costs were $5.3 million and primarily represented extinguishment costs associated with the redemption of $36.9 million of 12.875% Senior Secured Notes in the second quarter of 2022.

Equity Earnings from Laramie Energy, LLC.

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

For the nine months ended September 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 June 30, 2023 and six months ended June 30, 2022.

There were no equity earnings from our investment in Laramie Energy, LLC, for the nine months ended September 30, 2022.

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

Income 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.

For the nine months ended September 30, 2023, we recorded an income tax expense of $6.7 million primarily related to increased taxable income and higher apportionment factors in the states in which we pay taxes.

For the nine months ended September 30, 2022, we recorded an income tax expense of $0.8 million primarily related to increased taxable income.

Consolidating Condensed Financial Information

7 unchanged sentences

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

As of June 30, 2023

As of September 30, 2023

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

92 unchanged sentences

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

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

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

5 unchanged sentences

Depreciation and amortization 404 34,861 46 35,311

Loss on sale of assets, net — — — —

General and administrative expense (excluding depreciation) 7,158 16,536 — 23,694

Equity earnings from refining and logistics investments

— — (3,934) (3,934)

Acquisition and integration costs (2) — 4,669 — 4,669

Par West redevelopment and other costs — 3,127 — 3,127

Gain on sale of assets, net — — — —

Total operating expenses 7,562 2,378,761 (3,888) 2,382,435

11 unchanged sentences

Adjusted EBITDA $ (7,123) $ 257,413 $ 5,456 $ 255,746

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

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

5 unchanged sentences

Depreciation and amortization 517 24,561 47 25,125

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

General and administrative expense (excluding depreciation) 5,213 11,006 — 16,219

1 unchanged sentence

Par West redevelopment and other costs — 2,816 — 2,816

Gain on sale of assets, net — (185) — (185)

Total operating expenses 5,730 1,766,337 47 1,772,114

10 unchanged sentences

Adjusted EBITDA $ (5,221) $ 219,247 $ 34 $ 214,060

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

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

5 unchanged sentences

Depreciation and amortization 1,220 86,527 140 87,887

Loss on sale of assets, net — — — —

General and administrative expense (excluding depreciation) 21,467 44,682 (1) 66,148

Equity earnings from refining and logistics investments

— — (4,359) (4,359)

Acquisition and integration costs — 17,213 — 17,213

Par West redevelopment and other costs — 8,490 — 8,490

Gain on sale of assets, net — — — —

Total operating expenses 22,687 5,525,269 (4,220) 5,543,736

11 unchanged sentences

Adjusted EBITDA $ (20,922) $ 588,980 $ 6,153 $ 574,211

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

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

5 unchanged sentences

Depreciation and amortization 1,721 72,624 143 74,488

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

General and administrative expense (excluding depreciation) 14,147 33,403 — 47,550

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Par West redevelopment and other costs — 5,681 — 5,681

Gain on sale of assets, net 27 (197) — (170)

Total operating expenses 15,958 5,159,705 143 5,175,806

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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

Three Months Ended September 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 — (50,153) — (50,153)

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

Unrealized loss (gain) on derivatives — (8,995) — (8,995)

Acquisition and integration costs — 4,669 — 4,669

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Adjusted EBITDA (1) $ (7,123) $ 257,413 $ 5,456 $ 255,746

Three Months Ended June 30, 2022

Three Months Ended September 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 — (6,731) — (6,731)

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

Unrealized loss on derivatives — 3,004 — 3,004

Acquisition and integration costs — — — —

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Severance costs — 9 — 9

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

Depreciation and amortization 517 24,561 47 25,125

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Income tax expense (benefit) — 66,917 (66,849) 68

Gain on sale of assets, net — (185) — (185)

Adjusted EBITDA (1) $ (5,221) $ 219,247 $ 34 $ 214,060

Six Months Ended June 30, 2023

Nine Months Ended September 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 — (174,111) — (174,111)

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

Unrealized loss (gain) on derivatives — (487) — (487)

Acquisition and integration costs — 17,213 — 17,213

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Adjusted EBITDA (1) $ (20,922) $ 588,980 $ 6,153 $ 574,211

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

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

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Severance costs 351 1,921 — 2,272

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

Depreciation and amortization 1,721 72,624 143 74,488

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Income tax expense (benefit) — 72,616 (71,860) 756

Gain on sale of assets, net 27 (197) — (170)

Adjusted EBITDA (1) $ (13,808) $ 482,250 $ 95 $ 468,537

________________________________________

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.

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

Liquidity and Capital Resources

Our liquidity and capital requirements are primarily a function of our debt maturities and debt service requirements and contractual obligations, capital expenditures, turnaround outlays, and working capital needs.

Examples of working capital needs include purchases and sales of commodities and associated margin and collateral requirements, facility maintenance costs, and other costs such as payroll.

Examples of working capital needs include purchases and sales of commodities and associated margin and collateral requirements, facility maintenance

costs, and other costs such as payroll.

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

Our liquidity position as of 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.

Our liquidity position as of September 30, 2023 was $778.2 million and consisted of $769.7 million at Par Petroleum, LLC and subsidiaries, $8.5 million at Par Pacific Holdings, Inc., and an immaterial amount at all our other subsidiaries.

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

Aron Discretionary Draw Facility, the MLC receivable advances, and cash on hand of $347.1 million.

In addition, we have the Supply and Offtake Agreement with J.

Aron and the Washington Refinery Intermediation Agreement, which are used to finance the majority of the inventory at our Hawaii and Washington refineries, respectively.

Aron, which is used to finance the majority of the inventory at our Hawaii refinery.

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.

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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.

On July 26, 2023, we entered into a new LC Facility in connection with the July 2023 S&O Amendment.

Please read Note 11—Debt for further information about the ABL Credit Facility and Note 9—Inventory Financing Agreements for further information about the July 2023 S&O Amendment and LC Facility.

On October 4, 2023, we entered into the Second Amendment to the ABL Credit Facility and USOR entered into a Wind-Down and Termination Agreement;

please read Note 20—Subsequent Events for further information.

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 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,

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

Nine Months Ended September 30,

Net cash provided by operating activities $ 581,445 $ 369,053

Net cash used in investing activities (631,752) (37,661)

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

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.

Net cash used in financing activities (79,039) (34,522)

Cash flows for the nine months ended September 30, 2023

Net cash provided by operating activities for the nine months ended September 30, 2023 was driven primarily by net income of $439.3 million, non-cash charges to operations and non-operating items of approximately $106.4 million, and net cash provided by changes in operating assets and liabilities of approximately $35.7 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 $9.0 million,

partially offset by:

• 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:

• 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.

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

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

• an increase in our accounts payable primarily driven by the contribution of our Billings business, and

• a decrease in inventory driven by lower crude oil and refined product prices, lower inventory volumes, and a decrease in RINs assets at our Hawaii and Wyoming refineries,

partially offset by:

• 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

• an increase in our accounts receivable primarily driven by the contribution from our Billings Acquisition and higher accounts receivable balances across our legacy refining portfolio, and

• 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 obligation.

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

• $595.4 million used for the Billings Acquisition, and

• $53.7 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,

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• 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,

partially offset by:

• net repayment under the J.

Net cash used in financing activities was approximately $79.0 million for the nine months ended September 30, 2023 and consisted primarily of the following activities:

• net repayments under the J.

Aron Discretionary Draw Facility and MLC receivable advances of $52.4 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 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.

• repurchases of common stock of $32.2 million,

partially offset by:

• net borrowings of debt of $12.7 million primarily driven by the refinancing and consolidation of our debt.

Cash flows for the nine months ended September 30, 2022

Net cash provided by operating activities for the nine months ended September 30, 2022, was driven primarily by net income of $279.5 million, non-cash charges to operations of approximately $80.3 million, and net cash provided by changes in operating assets and liabilities of approximately $9.3 million.

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

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partially offset by:

• unrealized loss on derivatives contracts of $13.2 million.

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:

• unrealized gain on derivatives contracts of $10.2 million.

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

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

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

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 $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,

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;

• increase in prepaid and other primarily driven by a $71.2 million increase in Advances to suppliers for crude purchases.

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

• $38.1 million in additions to property, plant, and equipment driven by profit improvement and turnaround projects including crude recovery and debottlenecking projects at our Tacoma refinery, maintenance and tank replacement projects at our Wyoming refinery, and co-generation engine and tank conversion projects at our Hawaii refinery.

Net cash used in financing activities was approximately $34.5 million for the nine months ended September 30, 2022 and consisted primarily of the following activities:

• net repayments of debt of $72.3 million primarily driven by the partial repurchase and cancellation of our 7.75% Senior Secured Notes and 12.875% Senior Secured Notes, and

• repurchases of common stock of $7.3 million,

partially offset by:

• net borrowings under the J.

Aron Discretionary Draw Facility and MLC receivable advances of $48.2 million.

Cash Requirements.

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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 $344 million.

Please read Note 11—Debt for more information.

On October 4, 2023, we entered into the Second Amendment to the ABL Credit Facility and the Wind-Down Agreement.

Please read Note 11—Debt and Note 20—Subsequent Events 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 six months ended June 30, 2023.

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

Forward-Looking Statements

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

Such forward-looking statements involve known and unknown risks, uncertainties, and other important factors including, without limitation, the conflict between Russia and Ukraine and certain developments in the global crude oil markets, on our business, our customers, and the markets where we operate;

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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;

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;

renewable growth opportunities;

anticipated liabilities and costs associated with the Acquisition;

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis