PAR PACIFIC HOLDINGS, INC. 10-K

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview We are a growing energy company based in Houston, Texas, that provides both renewable and conventional fuels to the western United States. For more information, please read “Part I –Item 1. — Business—Overview” of this Form 10-K. Known Trends or Uncertainties While the market indices presented below under “Item 7. — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” are representative of the results of our refineries, each refinery’s realized gross margin on a per barrel basis will differ from the benchmark due to a variety of factors that affect the performance of the specific refinery. These factors include, but are not limited to, the actual type and timing of crude oil throughput; product yields; transportation and storage costs; fuel burn; product premiums or discounts; inventory fluctuations; feedstock and product purchases; commodity price risk-management activities; crude oil purchase financing activities; and other factors not reflected in the benchmark refining margin. We operate in logistically complex, niche markets and, as such, each of our refineries has unique cost advantages and disadvantages as compared to their respective relevant market indices. Recent Events Affecting Comparability of Periods Inflation. Energy prices are, among other factors, indicators of inflation, and the U.S. Federal Reserve (the “Fed”) has taken significant steps to curb inflation, and continued to increase interest rates in 2023, from near zero percent at the beginning of 2022 to a range of 5.25% to 5.5% in December 2023. These actions by the Fed acted to lower U.S. inflation rates, which have decreased 3.4% year over year as of the December inflation report released in January 2024. In 2023, the U.S. retail price for regular-grade gasoline averaged $3.52 per gallon, a decrease from gasoline price highs of approximately $5.01 per gallon in summer 2022. This decline was due, in part, to lower crude oil prices in 2023 compared to 2022 and higher gasoline inventories in the second half of 2023. The overall energy index decreased to negative 2.0% year over year as of December 2023. While inflation has improved relative to prior years, we do not believe that inflation has had a material effect on our business, financial condition or results of operations in 2023. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases, or price increases could lead to a decline in demand for our products, which could have a material effect on our business, financial condition, or results of operations. The COVID-19 Pandemic. Subsequent to the pandemic, and various preventive and mitigating measures taken in response, refined product demand has largely returned to 2019 levels. Despite global additions to refining capacity, the availability of refining capacity has not kept pace with demand, and global refinery utilization is above normal levels. Consequently, refining product margins have been consistently above pre-pandemic margins since the spring of 2022. Another pandemic event could cause a return to severe restrictions, leading to a deterioration of macroeconomic conditions and our industry. For more information, please read “Item 1. — Business — Markets” of this Form 10-K. Geopolitical Conflicts. Given the nature of our operations, including sourcing crude oil and feedstocks, geopolitical conflicts may affect our business and results of operations. The Russia-Ukraine war, the Israel-Palestine conflict, Houthi attacks in the Red Sea, and Iranian activities in the Strait of Hormuz have all disrupted global trade patterns, increased crude oil price volatility, and increased freight costs and delivery times. We continue to actively monitor the impact of these and other global situations on our people, operations, financial condition, liquidity, suppliers, customers, and industry, and are actively responding to the impacts that these matters have on our business. Please read “Item 1A. — Risk Factors” for more information on risks and uncertainties, including those related to economic factors, and their potential impacts on our business. Results of Operations Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Net Income. Our financial results for the year ended December 31, 2023 improved from a net income of $364.2 million for the year ended December 31, 2022 to $728.6 million for the year ended December 31, 2023. The increase was driven by a $274.3 million increase in refining segment operating income, an increase of $116.0 million in income tax benefit, and a $15.7 million increase in logistics segment operating income, partially offset by a $29.0 million increase in general and administrative expenses, a $13.8 million increase in acquisitions and integration expenses related to our Billings Acquisition, 30 and a $2.4 million increase in expenses related to Par West operations and redevelopment. Please read the discussions of segment and consolidated results below for additional information. Adjusted EBITDA and Adjusted Net Income. For the year ended December 31, 2023, Adjusted EBITDA was $696.2 million compared to $643.4 million for the year ended December 31, 2022. The improvement was primarily related to an increase of $54.7 million in our refining segment, an increase of $22.3 million in our logistics segment, and an increase of $8.0 million in our retail segment, partially of fset by a decrease of $32.3 million in our corporate segment. Please read the discussion of segment results below for additional information. For the year ended December 31, 2023, Adjusted Net Income was $501.2 million compared to $474.7 million for the year ended December 31, 2022. The improvement was primarily related to the same factors described above for the increase in Adjusted EBITDA partially offset by a $20.0 million increase in depreciation and amortization. Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Net Income (Loss). Our financial results for the year ended December 31, 2022 improved from a net loss of $81.3 million for the year ended December 31, 2021 to net income of $364.2 million for the year ended December 31, 2022. The improvement was primarily driven by widened product crack spreads across all of our refineries and a favorable change in the valuation of the embedded derivatives related to our inventory financing agreements driven by changes in commodity prices. These improvements were partially offset by unfavorable purchased product and crude oil differentials, unfavorable FIFO adjustments, increased intermediation fees of $79.0 million, and a $54.7 million increase in RINs expenses. Other factors impacting our results period over period include a 2021 gain on sale of assets of $63.9 million related to the Hawaii sale-leaseback transactions with no such gain in 2022 and a 14% increase in operating expenses compared to 2021. Adjusted EBITDA and Adjusted Net Income (Loss). For the year ended December 31, 2022, Adjusted EBITDA was $643.4 million compared to $125.6 million for the year ended December 31, 2021. The improvement was primarily related to favorable realized refined product crack spreads at all our refineries, partially offset by unfavorable purchased product and crude oil differentials and unfavorable FIFO adjustments, unfavorable inventory financing and environmental compliance costs, and higher operating expenses compared to 2021. For the year ended December 31, 2022, Adjusted Net Income was $474.7 million compared to an Adjusted Net Loss of $39.0 million for the year ended December 31, 2021. The change was primarily related to the same factors described above for the increase in Adjusted EBITDA. 31 The following table summarizes our consolidated results of operations for the years ended December 31, 2023, 2022, and 2021 (in thousands). The following should be read in conjunction with our consolidated financial statements under Item 8 of this Annual Report on Form 10-K. Year Ended December 31, 2023 2022 2021 Revenues $ 8,231,955 $ 7,321,785 $ 4,710,089 Cost of revenues (excluding depreciation) 6,838,109 6,376,014 4,338,474 Operating expense (excluding depreciation) 485,587 333,206 290,078 Depreciation and amortization 119,830 99,769 94,241 Impairment expense — — 1,838 General and administrative expense (excluding depreciation) 91,447 62,396 48,096 Equity earnings from refining and logistics investments (11,844) — — Acquisition and integration costs 17,482 3,663 87 Par West redevelopment and other costs 11,397 9,003 9,591 Gain on sale of assets, net (59) (169) (64,697) Total operating expenses 7,551,949 6,883,882 4,717,708 Operating income (loss) 680,006 437,903 (7,619) Other income (expense) Interest expense and financing costs, net (72,450) (68,288) (66,493) Debt extinguishment and commitment costs (19,182) (5,329) (8,144) Gain on curtailment of pension obligation — — 2,032 Other income (expense), net (53) 613 (52) Equity earnings from Laramie Energy, LLC 24,985 — — Total other expense, net (66,700) (73,004) (72,657) Income (loss) before income taxes 613,306 364,899 (80,276) Income tax benefit (expense) 115,336 (710) (1,021) Net income (loss) $ 728,642 $ 364,189 $ (81,297) 32 The following tables summarize our operating income (loss) by segment for the years ended December 31, 2023, 2022, and 2021 (in thousands). The following should be read in conjunction with our consolidated financial statements under Item 8 of this Annual Report on Form 10-K. Year ended December 31, 2023 Refining Logistics (1) Retail Corporate, Eliminations and Other (2) Total Revenues $ 7,969,480 $ 260,779 $ 592,480 $ (590,784) $ 8,231,955 Cost of revenues (excluding depreciation) 6,845,834 145,944 437,198 (590,867) 6,838,109 Operating expense (excluding depreciation) 373,612 24,450 87,525 — 485,587 Depreciation and amortization 81,017 25,122 11,462 2,229 119,830 General and administrative expense (excluding depreciation) — — — 91,447 91,447 Equity earnings from refining and logistics investments (7,363) (4,481) — — (11,844) Acquisition and integration costs — — — 17,482 17,482 Par West redevelopment and other costs — — — 11,397 11,397 Loss (gain) on sale of assets, net 219 — (308) 30 (59) Operating income (loss) $ 676,161 $ 69,744 $ 56,603 $ (122,502) $ 680,006 Year ended December 31, 2022 Refining Logistics (1) Retail Corporate, Eliminations and Other (2) Total Revenues $ 7,046,060 $ 198,821 $ 570,206 $ (493,302) $ 7,321,785 Cost of revenues (excluding depreciation) 6,332,694 109,458 428,712 (494,850) 6,376,014 Operating expense (excluding depreciation) 236,989 14,988 81,229 — 333,206 Depreciation and amortization 65,472 20,579 10,971 2,747 99,769 General and administrative expense (excluding depreciation) — — — 62,396 62,396 Acquisition and integration costs — — — 3,663 3,663 Par West redevelopment and other costs 9,003 — — — 9,003 Loss (gain) on sale of assets, net 1 (253) 56 27 (169) Operating income (loss) $ 401,901 $ 54,049 $ 49,238 $ (67,285) $ 437,903 Year ended December 31, 2021 Refining Logistics (1) Retail Corporate, Eliminations and Other (2) Total Revenues $ 4,471,111 $ 184,734 $ 456,416 $ (402,172) $ 4,710,089 Cost of revenues (excluding depreciation) 4,306,371 96,828 337,476 (402,201) 4,338,474 Operating expense (excluding depreciation) 203,511 14,722 71,845 — 290,078 Depreciation and amortization 58,258 22,044 10,880 3,059 94,241 Impairment expense 1,838 — — — 1,838 General and administrative expense (excluding depreciation) — — — 48,096 48,096 Acquisition and integration costs — — — 87 87 Par West redevelopment and other costs 9,591 — — — 9,591 Loss (gain) on sale of assets, net (19,659) (19) (45,034) 15 (64,697) Operating income (loss) $ (88,799) $ 51,159 $ 81,249 $ (51,228) $ (7,619) ________________________________________________________ (1) Our logistics operations consist primarily of intercompany transactions which eliminate on a consolidated basis. (2) Includes eliminations of intersegment Revenues and Cost of revenues (excluding depreciation) of $590.8 million, $493.3 million, and $402.2 million for the years ended December 31, 2023, 2022, and 2021, respectively. 33 Below is a summary of key operating statistics for the refining segment for the years ended December 31, 2023, 2022, and 2021: Year Ended December 31, 2023 2022 2021 Total Refining Segment Feedstocks Throughput (Mbpd) (1) 170.3 133.8 135.2 Refined product sales volume (Mbpd) (1) 183.1 140.3 138.8 Hawaii Refinery Feedstocks Throughput (Mbpd) 80.8 81.8 82.0 Yield (% of total throughput) Gasoline and gasoline blendstocks 26.3 % 25.6 % 24.8 % Distillates 40.4 % 38.8 % 45.0 % Fuel oils 28.9 % 31.4 % 26.6 % Other products 1.1 % 0.7 % 0.6 % Total yield 96.7 % 96.5 % 97.0 % Refined product sales volume (Mbpd) 89.1 84.0 82.6 Adjusted Gross Margin per bbl ($/throughput bbl) (2) $ 15.25 $ 13.99 $ 4.56 Production costs per bbl ($/throughput bbl) (3) 4.57 4.86 3.98 D&A per bbl ($/throughput bbl) 0.65 0.67 0.66 Montana Refinery Feedstocks Throughput (Mbpd) (1) 54.4 — — Yield (% of total throughput) Gasoline and gasoline blendstocks 48.1 % — % — % Distillates 32.0 % — % — % Asphalt 12.1 % — % — % Other products 3.2 % — % — % Total yield 95.4 % — % — % Refined product sales volume (Mbpd) 58.6 — — Adjusted Gross Margin per bbl ($/throughput bbl) (2) $ 21.14 $ — $ — Production costs per bbl ($/throughput bbl) (3) 10.78 — — D&A per bbl ($/throughput bbl) 1.45 — — Washington Refinery Feedstocks Throughput (Mbpd) 40.0 35.5 36.3 Yield (% of total throughput) Gasoline and gasoline blendstocks 23.5 % 24.0 % 23.7 % Distillates 34.5 % 34.3 % 34.5 % Asphalt 19.7 % 20.3 % 20.7 % Other products 18.7 % 18.2 % 18.3 % Total yield 96.4 % 96.8 % 97.2 % 34 Year Ended December 31, 2023 2022 2021 Refined product sales volume (Mbpd) 41.7 39.7 39.6 Adjusted Gross Margin per bbl ($/throughput bbl) (2) $ 9.41 $ 18.00 $ 2.98 Production costs per bbl ($/throughput bbl) (3) 4.12 4.01 3.86 D&A per bbl ($/throughput bbl) 1.91 2.19 1.57 Wyoming Refinery Feedstocks Throughput (Mbpd) 17.6 16.5 16.9 Yield (% of total throughput) Gasoline and gasoline blendstocks 47.1 % 49.7 % 47.3 % Distillates 46.7 % 43.1 % 45.7 % Fuel oil 2.5 % 2.4 % 2.2 % Other products 1.5 % 2.1 % 1.7 % Total yield 97.8 % 97.3 % 96.9 % Refined product sales volume (Mbpd) 17.9 16.6 16.6 Adjusted Gross Margin per bbl ($/throughput bbl) (2) $ 25.15 $ 26.50 $ 14.47 Production costs per bbl ($/throughput bbl) (3) 7.50 7.32 6.22 D&A per bbl ($/throughput bbl) 2.69 2.85 2.86 Market Indices (average $ per barrel) 3-1-2 Singapore Crack Spread (4) $ 19.50 $ 25.43 $ 6.22 RVO Adjusted Pacific Northwest 3-1-1-1 Index (5) 25.82 35.27 13.69 RVO Adjusted USGC 3-2-1 Index (6) 22.87 28.55 10.98 Crude Oil Prices (average $ per barrel) Brent $ 82.17 $ 99.04 $ 70.95 WTI 77.60 94.33 68.11 ANS (7) 82.36 98.76 70.56 Bakken Clearbrook (7) 78.58 96.37 67.65 WCS Hardisty (7) 59.34 73.28 53.90 Brent M1-M3 0.81 3.49 1.12 ________________________________________________________ (1) Feedstocks throughput and sales volumes per day for the Montana refinery for the year ended December 31, 2023 are calculated based on the 214-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 year ended December 31, 2023 plus the Montana refinery’s throughput or sales volumes averaged over the period from June 1, 2023 to December 31, 2023. The 2022 and 2021 amounts for the total refining segment represent the sum of the Hawaii, Washington, and Wyoming refineries’ throughput or sales volumes averaged over the year ended December 31, 2022 and 2021. (2) We calculate Adjusted Gross Margin per barrel by dividing Adjusted Gross Margin by total refining throughput. Adjusted Gross Margin for our Washington refinery is determined under the last-in, first-out (“LIFO”) inventory costing method. Adjusted Gross Margin for our other refineries is determined under the first-in, first-out (“FIFO”) inventory costing method. The definition of Adjusted Gross Margin was modified beginning with the financial results reported for periods in 35 fiscal year 2022. We have recast Adjusted Gross Margin for prior periods when reported to conform to the modified presentation. Please see discussion of Adjusted Gross Margin below. (3) Management uses production costs per barrel to evaluate performance and compare efficiency to other companies in the industry. There are a variety of ways to calculate production costs per barrel; different companies within the industry calculate it in different ways. We calculate production costs per barrel by dividing all direct production costs, which include the costs to run the refineries including personnel costs, repair and maintenance costs, insurance, utilities, and other miscellaneous costs, by total refining throughput. Our production costs are included in Operating expense (excluding depreciation) on our consolidated statement of operations, which also includes costs related to our bulk marketing operations. (4) We believe the 3-1-2 Singapore Crack Spread (or three barrels of Brent crude oil converted into one barrel of gasoline and two barrels of distillates (diesel and jet fuel)) is the most representative market indicator for our operations in Hawaii. (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. (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 years ended December 31, 2023, 2022, and 2021: Year Ended December 31, 2023 2022 2021 Retail Segment Retail sales volumes (thousands of gallons) 117,550 105,456 109,150 Non-GAAP Performance Measures Management uses certain financial measures to evaluate our operating performance that are considered non-GAAP financial measures. These measures should not be considered in isolation or as substitutes or alternatives to their most directly comparable GAAP financial measures or any other measure of financial performance or liquidity presented in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures used by other companies since each company may define these terms differently. We believe Adjusted Gross Margin (as defined below) provides useful information to investors because it eliminates the gross impact of volatile commodity prices and adjusts for certain non-cash items and timing differences created by our inventory financing agreements and lower of cost and net realizable value adjustments to demonstrate the earnings potential of the business before other fixed and variable costs, which are reported separately in Operating expense (excluding depreciation) and Depreciation and amortization. Management uses Adjusted Gross Margin per barrel to evaluate operating performance and compare profitability to other companies in the industry and to industry benchmarks. We believe Adjusted Net Income (Loss) and Adjusted EBITDA (as defined below) are useful supplemental financial measures that allow investors to assess the financial performance of our assets without regard to financing methods, capital structure, or historical cost basis, the ability of our assets to generate cash to pay interest on our indebtedness, and our operating performance and return on invested capital as compared to other companies without regard to financing methods and capital structure. Beginning with financial results reported for periods in fiscal year 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, which became effective on January, 1, 2023. Beginning with financial results reported for periods in fiscal year 2023, Adjusted Net Income (loss) and Adjusted EBITDA also exclude the redevelopment and other costs for our Par West facility, which was shut down in 2020. This modification improves comparability between periods by excluding expenses incurred in connection with the strategic redevelopment of this non-operating facility. We have recast Adjusted Net Income (Loss) and Adjusted EBITDA for prior periods when reported to conform to the modified presentation. 36 Beginning with financial results reported 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 acquired on June 1, 2023, as part of the Billings Acquisition. Beginning with financial results reported for the fourth quarter of 2023, Adjusted Gross Margin, Adjusted Net Income (Loss), and Adjusted EBITDA excludes all hedge losses (gains) associated with our Washington ending inventory and LIFO layer increment impacts associated with our Washington inventory. In addition, we have modified our environmental obligation mark-to-market adjustment to include only the mark-to-market losses (gains) associated with our net RINs liability and net obligation associated with the Washington Climate Commitment Act (“Washington CCA”) and Clean Fuel Standard. This modification was made as part of our change in how we estimate our environmental obligation liabilities. Beginning with financial results reported for the fourth quarter of 2023, Adjusted Net Income (loss) excludes unrealized interest rate derivative losses (gains) and all Laramie Energy related impacts with the exception of cash distributions. Please read Note 2—Summary of Significant Accounting Policies, Environmental Credits and Obligations section, for a discussion of the change in estimate. Adjusted Gross Margin Adjusted Gross Margin is defined as operating income (loss) excluding: • operating expense (excluding depreciation); • depreciation and amortization (“D&A”); • Par’s portion of interest, taxes, and depreciation expense from refining and logistics investments; • impairment expense; • loss (gain) on sale of assets, net; • inventory valuation adjustment (which adjusts for timing differences to reflect the economics of our inventory financing agreements, including lower of cost or net realizable value adjustments, the impact of the embedded derivative repurchase or terminal obligations, hedge losses (gains) associated with our Washington ending inventory and intermediation obligation, purchase price allocation adjustments, and LIFO layer increment and decrement impacts associated with our Washington inventory); • Environmental obligation mark-to-market adjustment (which represents 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); and • unrealized loss (gain) on derivatives. 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): Year ended December 31, 2023 Refining Logistics Retail Operating income $ 676,161 $ 69,744 $ 56,603 Operating expense (excluding depreciation) 373,612 24,450 87,525 Depreciation and amortization 81,017 25,122 11,462 Par’s portion of interest, taxes, and depreciation expense from refining and logistics investments 1,586 1,857 — Inventory valuation adjustment 102,710 — — Environmental obligation mark-to-market adjustments (189,783) — — Unrealized gain on derivatives (50,511) — — Loss (gain) on sale of assets, net 219 — (308) Adjusted Gross Margin (1) $ 995,011 $ 121,173 $ 155,282 37 Year ended December 31, 2022 Refining Logistics Retail Operating income $ 401,901 $ 54,049 $ 49,238 Operating expense (excluding depreciation) 236,989 14,988 81,229 Depreciation and amortization 65,472 20,579 10,971 Inventory valuation adjustment (15,712) — — Environmental obligation mark-to-market adjustments 105,760 — — Unrealized loss on derivatives 9,336 — — Par West redevelopment and other costs 9,003 — — Loss (gain) on sale of assets, net 1 (253) 56 Adjusted Gross Margin (1) $ 812,750 $ 89,363 $ 141,494 Year ended December 31, 2021 Refining Logistics Retail Operating income (loss) $ (88,799) $ 51,159 $ 81,249 Operating expense (excluding depreciation) 203,511 14,722 71,845 Depreciation and amortization 58,258 22,044 10,880 Impairment expense 1,838 — — Inventory valuation adjustment 31,841 — — Environmental obligation mark-to-market adjustments 66,350 — — Unrealized loss on derivatives 1,517 — — Par West redevelopment and other costs 9,591 — — Gain on sale of assets, net (19,659) (19) (45,034) Adjusted Gross Margin (1) $ 264,448 $ 87,906 $ 118,940 ________________________________________ (1) For the years ended December 31, 2023 and 2022, there was no impairment expense. Adjusted Net Income (Loss) and Adjusted EBITDA Adjusted Net Income (Loss) is defined as Net income (loss) excluding: • inventory valuation adjustment (which adjusts for timing differences to reflect the economics of our inventory financing agreements, including lower of cost or net realizable value adjustments, the impact of the embedded derivative repurchase or terminal obligations, hedge losses (gains) associated with our Washington ending inventory and intermediation obligation, purchase price allocation adjustments, and LIFO layer increment and decrement impacts associated with our Washington inventory); • Environmental obligation mark-to-market adjustments (which represents the mark-to-market losses (gains) associated with our RINs and Washington CCA and Clean Fuel Standard); • unrealized (gain) loss on derivatives; • acquisition and integration costs; • redevelopment and other costs related to Par West; • debt extinguishment and commitment costs; • increase in (release of) tax valuation allowance and other deferred tax items; • changes in the value of contingent consideration and common stock warrants; • severance costs; • (gain) loss on sale of assets; • impairment expense; • impairment expense associated with our investment in Laramie Energy; and • Par’s share of equity losses from Laramie Energy, LLC, excluding cash distributions . Adjusted EBITDA is defined as Adjusted Net Income (Loss) excluding: • D&A; • interest expense and financing costs, net, excluding interest rate derivative loss (gain); 38 • cash distributions from Laramie Energy, LLC to Par; • Par's portion of interest, taxes, and depreciation expense from refining and logistics investments; and • income tax expense (benefit) excluding the increase in (release of) tax valuation allowance. The following table presents a reconciliation of Adjusted Net Income (Loss) and Adjusted EBITDA to the most directly comparable GAAP financial measure, net income (loss), on a historical basis for the periods indicated (in thousands): Year Ended December 31, 2023 2022 2021 Net income (loss) $ 728,642 $ 364,189 $ (81,297) Inventory valuation adjustment 102,710 (15,712) 31,841 Environmental obligation mark-to-market adjustments (189,783) 105,760 66,350 Unrealized loss (gain) on derivatives (49,690) 9,336 (1,393) Par West redevelopment and other costs 11,397 — — Acquisition and integration costs 17,482 3,663 87 Debt extinguishment and commitment costs 19,182 5,329 8,144 Changes in valuation allowance and other deferred tax items (1) (126,219) — — Severance costs 1,785 2,272 84 Impairment expense — — 1,838 Equity losses from Laramie Energy, LLC, excluding cash distributions (14,279) — — Gain on sale of assets, net (59) (169) (64,697) Adjusted Net Income (Loss) (2) 501,168 474,668 (39,043) Depreciation and amortization 119,830 99,769 94,241 Interest expense and financing costs, net, excluding unrealized interest rate derivative loss (gain) 71,629 68,288 69,403 Laramie Energy, LLC cash distributions to Par (10,706) — — Par's portion of interest, taxes, and depreciation expense from refining and logistics investments 3,443 — — Income tax expense 10,883 710 1,021 Adjusted EBITDA (2) $ 696,247 $ 643,435 $ 125,622 ________________________________________________________ (1) For the year ended December 31, 2023, recognized a non-cash deferred tax benefit of $126.2 million related to the release of a majority of the valuation allowance against our federal net deferred tax assets. This tax benefit is included in Income tax expense (benefit) on our consolidated statements of operations. (2) For the years ended December 31, 2022 and 2021, there was no change in value of contingent consideration, change in value of common stock warrants, impairments associated with our investment in Laramie Energy, or our share of Laramie Energy’s asset impairment losses in excess of our basis difference. Please read the Non-GAAP Performance Measures discussion above for information regarding changes to the components of Adjusted Net Income (Loss) and Adjusted EBITDA made during 2023. Discussion of Operating Income by Segment Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Refining. Operating income for our refining segment was $676.2 million for the year ended December 31, 2023, an improvement of $274.3 million compared to $401.9 million for the year ended December 31, 2022. The increase in operating income was primarily driven by: • a decrease of $140.0 million in environmental credit and related obligations costs across our refineries in our legacy portfolio driven by favorable mark-to-market adjustments and a gain on retirement of prior year RINs, 39 • an increase of $106.0 million driven by a 6% increase in refined product sales volumes at our refineries in our legacy portfolio, • a favorable change in step-out obligations related to our intermediation agreements of $79.5 million driven by changes in commodity prices, • a net decrease of $76.4 million in our derivative costs associated with all our refineries, • a $56.9 million contribution from the Billings Acquisition, • $37.0 million related to lower fuel burn costs at all our refineries, and • an increase of $32.8 million related to a favorable change in crude oil differentials at our refineries in our legacy portfolio, partially offset by: • a net decrease of $112.9 million related to declining crack spreads at our refineries in our legacy portfolio, • an increase in purchased product costs of $98.0 million at all our refineries in our legacy portfolio, and • an increase in logistics and other product delivery costs of $35.6 million at our refineries in our legacy portfolio. Logistics. Operating income for our logistics segment was $69.7 million for the year ended December 31, 2023, an increase of $15.7 million compared to $54.0 million for the year ended December 31, 2022. The increase is primarily due to an $8.5 million contribution from the Billings Acquisition logistics assets acquired in June 2023 and an $10.4 million increase in operating income driven by an increase in throughput volumes throughout our legacy logistics portfolio, partially offset by an increase in variable expenses of $5.5 million. Retail. Operating income for our retail segment was $56.6 million for the year ended December 31, 2023, an increase of $7.4 million compared to operating income of $49.2 million for the year ended December 31, 2022. The increase in operating income was primarily driven by $10.6 million related to higher fuel sales volum es and $3.4 million associated with increased merchandise sales, partly offset by $6.3 million of higher operating expenses driven by i ncreases in employee costs and credit card fees in the year ended December 31, 2023 compared to the year ended December 31, 2022. Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Refining. Operating income for our refining segment was $401.9 million for the year ended December 31, 2022, an improvement of $490.7 million compared to an operating loss of $88.8 million for the year ended December 31, 2021. The increase in profitability was primarily driven by widening product crack spreads across all our refineries, and a favorable change in the valuation of the embedded derivatives related to our intermediation agreements driven by changes in commodity prices, partially offset by unfavorable purchased product and crude differentials, unfavorable FIFO adjustments, higher inventory financing costs of $79.0 million, increased fuel burn costs related to higher crude oil costs as discussed below, increased RINs costs of $54.7 million, and unfavorable derivative costs. Other factors impacting our results period over period include a 2021 gain on sale of assets of $19.7 million primarily related to the Sale-Leaseback Transactions we closed in the first quarter of 2021 and a 15% increase in operating expenses in 2022, primarily driven by increased utilities, maintenance, and employee costs. Logistics. Operating income for our logistics segment was $54.0 million for the year ended December 31, 2022, an increase of $2.8 million compared to operating income of $51.2 million for the year ended December 31, 2021. The increase is primarily due to higher third party revenues partially offset by net 2% and 4% decreased throughput across our Hawaii and Wyoming logistics assets, respectively. Retail. Operating income for our retail segment was $49.2 million for the year ended December 31, 2022, a decrease of $32.0 million compared to operating income of $81.2 million for the year ended December 31, 2021. The decrease in profitability was primarily due to a gain on sale of assets of $45.0 million primarily related to the 2021 Hawaii sale-leaseback transactions we closed in the first quarter of 2021 with no such gain in 2022 and a 13% increase in operating expenses in the year ended December 31, 2022 primarily related to increased employee costs, higher credit card processing fees due to increased gasoline prices, rebranding fees in Hawaii, and higher rent expense related to the additional leases from our 2021 Hawaii sale-leaseback transactions, partially offset by a 31% increase in fuel margin. 40 Discussion of Adjusted Gross Margin by Segment Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Refining . For the year ended December 31, 2023, our refining Adjusted Gross Margin was approximately $995.0 million, an increase of $182.2 million compared to $812.8 million for the year ended December 31, 2022. The increase in profitability was primarily due to Adjusted Gross Margin contributed by the Montana refinery o f $246.1 million and 6.0% higher refined product sales margins across our legacy refining portfolio, partially offs et by $155.6 million higher environmental credit obligation costs, excluding the mark-to-market impacts, and lower crack spreads of $107.6 million . • Adjusted Gross Margin for the Hawaii refinery improved by $1.26 per barrel from $13.99 per barrel during the year ended December 31, 2022, to $15.25 per barrel during the year ended December 31, 2023, primarily due to lower feedstock costs, a 6% increase in refined product sales volumes, a favorable change in realized derivatives, and higher yield, partially offset by $98.0 million higher purchased product costs and lower crack spreads. The Singapore 3-1-2 index declined from $25.43 in the year ended December 31, 2022 to $19.50 during the year ended December 31, 2023. • Adjusted Gross Margin for the Wyoming refinery decreased by $1.35 per barrel from $26.50 per barrel during the year ended December 31, 2022 to $25.15 per barrel during the year ended December 31, 2023. The change is primarily due t o a 8% increase in refined product sales volumes, partially offset by lower crack spreads. The RVO Adjusted USGC 3-2-1 index declined from $28.55 during the year ended December 31, 2022 to $22.87 in the year ended December 31, 2023. • Adjusted Gross Margin for the Washington refinery decreased by $8.59 per barrel from $18.00 per barrel during the year ended December 31, 2022 to $9.41 per barrel during the year ended December 31, 2023, primarily due to higher environmental credit obligation expenses, declining crack spreads, and higher refined product delivery costs, partially offset by lower feedstock costs and 5% higher refined product sales volumes . The RVO Adjusted Pacific Northwest 3-1-1-1 index declined from $35.27 in the year ended December 31, 2022 to $25.82 during the year ended December 31, 2023. Logistics. For the year ended December 31, 2023, our logistics Adjusted Gross Margin was approximately $121.2 million, an increase of $31.8 million compared to $89.4 million for the year ended December 31, 2022. The increase was primarily due to Adjusted Gross Ma rgin of $23.8 million contributed from the Billings Acquisition logistics assets acquired in June 2023 and a 3% increase in throughput across our legacy assets, net of associated higher fees and variable expenses, and higher third-party revenue. Retail. For the year ended December 31, 2023, our retail Adjusted Gross Margin was approximately $155.3 million, an increase of $13.8 million compared to $141.5 million for the year ended December 31, 2022. The increase was primarily related to an 11% increase in sales volumes and a 33% increase in merchandise sales. Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Refining . For the year ended December 31, 2022, our refining Adjusted Gross Margin was approximately $812.8 million, an increase of $548.4 million compared to $264.4 million for the year ended December 31, 2021. The increase in profitability was primarily driven by favorable realized product crack spreads across all our refineries partially offset by unfavorable purchased product costs, unfavorable FIFO adjustments, increased inventory financing costs of $79.0 million in Hawaii, unfavorable derivative costs, and increased costs related to fuel burn related to higher crude oil costs as discussed below. • Adjusted Gross Margin for the Hawaii refinery improved from $4.56 per barrel in 2021 to $13.99 per barrel in 2022 primarily due to favorable product crack spreads, and a 1.7% increase in refined product sales volumes, partially offset by unfavorable purchased product and crude oil costs, unfavorable FIFO adjustments, a $78.8 million increase in intermediation fees driven primarily by $59.4 million higher market structure fees under the Supply and Offtake Agreement, increased fuel burn costs related to higher crude oil costs as discussed below, and unfavorable derivatives. • Adjusted Gross Margin for the Washington refinery increased by $15.02 per barrel primarily due to favorable product crack spreads, partially offset by unfavorable feedstock costs and increased costs related to fuel burn. • Adjusted Gross Margin for the Wyoming refinery increased by $12.03 per barrel primarily due to favorable product crack spreads, partially offset by unfavorable feedstock costs and increased RINs costs. Logistics. For the year ended December 31, 2022, our logistics Adjusted Gross Margin was approximately $89.4 million, an increase of $1.5 million compared to $87.9 million for the year ended December 31, 2021. The increase was 41 primarily driven by higher third party revenues partially offset by net 2% and 4% decreased throughput across our Hawaii and Wyoming logistics assets, respectively. Retail. For the year ended December 31, 2022, our retail Adjusted Gross Margin was approximately $141.5 million, an increase of $22.6 million compared to $118.9 million for the year ended December 31, 2021. The increase was primarily due to a 31% increase in fuel margins partially offset by a 3% decline in sales volumes. Discussion of Consolidated Results Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Revenues. For the year ended December 31, 2023, revenues were $8.2 billion, a $0.9 billion increase compared to $7.3 billion for the year ended December 31, 2022. The Billings Acquisition contributed revenue s of $1.5 billion in the first seven months under our owne rship, partially offset by a decrease of $0.6 billion across our legacy refinery portfolio. The decrease in our legacy refining revenue was primarily driven by a $0.8 billion decrease related to lower crude oil prices, partially offset by a 6% increase in sales volumes. Average Brent crude oil prices declined 17% and average WTI crude oil prices declined 18% as compared to the prior period. Revenues at our retail segment increased $22.3 million primarily due to an 11% increase in sales volume and a 33% increase in merchandise sales, partially offset by an 8% decrease in fuel sales prices. Cost of Revenues (Excluding Depreciation). For the year ended December 31, 2023, cost of revenues (excluding depreciation) was $6.8 billion, a $0.4 billion increase compared to $6.4 billion for the year ended December 31, 2022, inclusive of a $1.5 billion contribution from the Billings Acquisitio n. There was a decrease of $1.0 billion of cost of revenues (excluding depreciation) across our legacy refining operations primarily due to decreases in crude oil prices as discussed above. Operating Expense (Excluding Depreciation). For the year ended December 31, 2023, operating expense (excluding depreciation) was approximately $485.6 million, an increase of $152.4 million compa red to $333.2 million for the year ended December 31, 2022. $134.1 million of the increase was contributed by the Billings Acquisition. Other factors that drove the increase include higher repair and maintenance and employee expenses. Depreciation and Amortization . For the year ended December 31, 2023, D&A expense was approximately $119.8 million, an increase of $20.0 million compared to $99.8 million for the year ended December 31, 2022. The increase was primarily driven by the $21.7 million contribution from the Billings Acquisition. General and Administrative Expense (Excluding Depreciation). For the year ended December 31, 2023, general and administrative expense (excluding depreciation) was approximately $91.4 million, an increase of $29.0 million compared to $62.4 million for the year ended December 31, 2022. The increase was prim arily due to a $12.1 million increase in employee costs, a $6.0 million increase in outside services, $5.8 million of expenses related to development of our renewable projects, and $3.9 million higher IT expenses. Equity earnings from refining and logistics investments . For the year ended December 31, 2023 , equity earnings from refining and logistics investments were $11.8 million. As part of the Billings Acquisition, we acquired a 65% limited partnership ownership interest in YELP and a 40% ownership interest in YPLC. For the year ended December 31, 2023, our proportionate share of YELP’s net income and YPLC’s net income was $8.1 million and $4.4 million, respectively. Please read Note 3—Refining and Logistics Equity Investments to our consolidated financial statements under Item 8 of this Form 10-K for additional information. Acquisition and Integration costs. For the year ended December 31, 2023 , we incurred $17.5 million of acquisition and integration costs related to the Billings Acquisition, compared to $3.7 million of acquisition and integration costs for the year ended December 31, 2022. Please read Note 5—Acquisitions to our consolidated financial statements under Item 8 of this Form 10-K for more information. Par West redevelopment and other costs. For the year ended December 31, 2023, Par West redevelopment and other costs were $11.4 million, an increase of $2.4 million compared to $9.0 million for the year ended December 31, 2022, associated with the operation and decommissioning of our Par West facility. Interest Expense and Financing Costs, Net . For the year ended December 31, 2023, our interest expense and financing costs were approximately $72.5 million, an increase of $4.2 million compared to $68.3 million for the year ended December 31, 2022. The increase was primarily due to higher outstanding debt balances and increased borrowings under our inventory financing agreements. Please read Note 14—Debt and Note 12—Inventory Financing Agreements to our 42 consolidated financial statements under Item 8 of this Form 10-K for further discussion on our indebtedness and inventory financing, respectively. Debt extinguishment and commitment costs. For the year ended December 31, 2023, our debt extinguishment and commitment costs wer e approximately $19.2 million in connection with the refinancing of our long-term debt in the first quarter of 2023 and the termination of the Washington Refinery Intermediation Agreement in the fourth quarter of 2023. For the year ended December 31, 2022, our debt extinguishment and commitment costs were approximately $5.3 million and prim arily represented extinguishment costs associated with the repurchase and cancellation of an additional $36.9 million of 12.875% Senior Secured Notes in the second quarter of 2022. Please read Note 14—Debt to our consolidated financial statements under Item 8 of this Form 10-K for further discussion. Equity Earnings from Laramie Energy, LLC. For the year ended December 31, 2023, equity earnings from Laramie Energy, LLC were $25.0 million . 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. Our share of this distribution was $10.7 million. Effective February 21, 2023, we resumed the application of equity method accounting with respect to our investment in Laramie Energy. In the fourth quarter of 2023 and due to Laramie Energy, LLC’s positive financial results, our share of net income from our investment in Laramie Energy exceeded our share of net losses recorded during the period that equity method accounting was suspended and we recorded equity earnings of $14.3 million. There were no equity earnings from our investment in Laramie Energy, LLC, for the year ended December 31, 2022. Please read Note 4—Investment in Laramie Energy to our consolidated financial statements under Item 8 of this Form 10-K for more information. Income Taxes. For the year ended December 31, 2023, we recorded an income tax benefit of $115.3 million primarily related to the release of the federal tax valuation allowance in the fourth quarter of 2024, partially offset by deferred tax expense from net operating loss utilization and state tax expense. For the year ended December 31, 2022, we recorded an income tax expense of $0.7 million primarily driven by an increase in state taxable income. Please read Note 22—Income Taxes to our consolidated financial statements under Item 8 of this Form 10-K for more information. Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Revenues. For the year ended December 31, 2022, revenues were $7.3 billion, a $2.6 billion increase compared to $4.7 billion for the year ended December 31, 2021. The increase was primarily the result of an increase of $2.5 billion in third-party revenues at our refining segment primarily as a result of increases in Brent and WTI crude oil prices. Brent crude oil prices rose to $99.04 per barrel for the year ended December 31, 2022 compared to $70.95 per barrel for the year ended December 31, 2021, and WTI crude oil prices averaged $94.33 per barrel during the year ended December 31, 2022 compared to $68.11 per barrel in the year ended December 31, 2021. Other factors contributing to the increase in revenues at our refining segment include improved realized product crack spreads across all our refineries. Revenues at our retail segment increased $113.8 million primarily due to a 36% increase in fuel prices slightly offset by a 3% decline in sales volume. Cost of Revenues (Excluding Depreciation). For the year ended December 31, 2022, cost of revenues (excluding depreciation) was $6.4 billion, a $2.1 billion increase compared to $4.3 billion for the year ended December 31, 2021. The increase was primarily due to increases in Brent and WTI crude oil prices as discussed above, unfavorable purchased products, higher feedstock costs, and higher inventory financing costs. These increases were partially offset by a favorable change in the valuation of the embedded derivatives related to our inventory financing agreements driven by changes in commodity prices. Operating Expense (Excluding Depreciation). For the year ended December 31, 2022, operating expense (excluding depreciation) was approximately $333.2 million, an increase of $43.1 million compared to $290.1 million for the year ended December 31, 2021. The increase was primarily due to higher utilities expenses, maintenance expenses at our Hawaii refinery and increased employee costs. Other factors contributing to the increase include higher outside services expenses. Depreciation and Amortization . For the year ended December 31, 2022, D&A expense was approximately $99.8 million, an increase of $5.6 million compared to $94.2 million for the year ended December 31, 2021. The increase was primarily due to amortization of our Washington refinery turnaround completed in 2022. Impairment Expense. During the year ended December 31, 2021, we recorded goodwill and asset impairment charges totaling $1.8 million primarily related to discontinued capital projects. Please read Note 9—Property, Plant, and Equipment and Impairment of Long-Lived Assets to our consolidated financial statements under Item 8 of this Form 10-K for further discussion on our 2021 asset impairment charges. There were no impairment charges during the year ended December 31, 2022. 43 Gain on Sale of Assets, Net. For the year ended December 31, 2022, there was a $0.2 million gain on sale of assets, net, which resulted primarily from the sale of equipment. For the year ended December 31, 2021, the gain on sale of assets, net was approximately $64.7 million and primarily related to the gain recognized as a result of the Sale-Leaseback Transactions we closed in the first quarter of 2021. Please read Note 17—Leases to our consolidated financial statements under Item 8 of this Form 10-K for further discussion on the Sale-Leaseback Transactions. General and Administrative Expense (Excluding Depreciation). For the year ended December 31, 2022, general and administrative expense (excluding depreciation) was approximately $62.4 million, an increase of $14.3 million compared to $48.1 million for the year ended December 31, 2021. The increase was primarily due to higher employee costs and an increase in the use of outside services. Acquisition and Integration Costs. For the year ended December 31, 2022, we incurred approximately $3.7 million of acquisition and integration costs primarily related to costs incurred for the pending Billings Acquisition. For the year ended December 31, 2021, we incurred an immaterial amount of acquisition and integration costs. Please read Note 5—Acquisitions to our consolidated financial statements under Item 8 of this Form 10-K for more information. Interest Expense and Financing Costs, Net . For the year ended December 31, 2022, our interest expense and financing costs were approximately $68.3 million, an increase of $1.8 million compared to $66.5 million for the year ended December 31, 2021. The increase was primarily due to an increase of $7.4 million related to increased borrowings under our inventory financing agreements and increased rates on our Term Loan B Facility. These increases were partially offset by lower outstanding debt balances driven by the maturity of our outstanding 5.00% Convertible Senior Notes in June 2021, the repayment of the PHL, Mid Pac, and Retail Property Term Loans and interest rate swap related to the Retail Property Term Loan in the first quarter of 2021, and reduced interest on our 12.875% Senior Secured Notes driven by early repayment of these notes. Please read Note 12—Inventory Financing Agreements and Note 14—Debt to our consolidated financial statements under Item 8 of this Form 10-K for further discussion on our inventory financing and indebtedness, respectively. Debt extinguishment and commitment costs. For the year ended December 31, 2022, our debt extinguishment and commitment costs were approximately $5.3 million and primarily represented extinguishment costs associated with the repurchase and cancellation of an additional $36.9 million of 12.875% Senior Secured Notes in the second quarter of 2022. For the year ended December 31, 2021, our debt extinguishment and commitment costs were approximately primarily $8.1 million and primarily represented $6.6 million in extinguishment costs associated with the redemption of $36.8 million of 12.875% Senior Secured Notes in June 2021 and $1.4 million in extinguishment costs associated with the early repayment of the Retail Property Term Loan on February 23, 2021. Please read Note 14—Debt to our consolidated financial statements under Item 8 of this Form 10-K for further discussion. Gain on curtailment of pension obligation. During the year ended December 31, 2021, we recorded a gain on curtailment of pension obligation of $2.0 million related to the amendment to the Wyoming Refining defined benefit plan. Please read Note 20—Benefit Plans to our consolidated financial statements under Item 8 of this Form 10-K for further discussion on the gain on curtailment of pension obligation. There was no gain on curtailment of pension obligation for the year ended December 31, 2022. Income Taxes. For the year ended December 31, 2022, we recorded an income tax expense of $0.7 million primarily driven by an increase in state taxable income. For the year ended December 31, 2021, we recorded an income tax expense of $1.0 million primarily driven by foreign withholding taxes. Condensed Consolidating Financial Information On February 28, 2023, Par Petroleum, LLC (“Par Borrower”) entered into the Term Loan Credit Agreement (the “Term Loan Credit Agreement”) due 2030 with Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto. The Term Loan Credit Agreement was co-issued by Par Petroleum Finance Corp. (together with the Par Borrower, the “Term Loan Borrowers”), which has no independent assets or operations. The Term Loan Credit Agreement is guaranteed on a senior unsecured basis only as to payment of principal and interest by Par Pacific Holdings, Inc. (the “Parent”) and is guaranteed on a senior secured basis by all of the subsidiaries of Par Borrower. The Term Loan Credit Agreement proceeds were used to refinance our existing Term Loan B and repurchase our outstanding 7.75% Senior Secured Notes and 12.875% Senior Secured Notes, all three of which had similar guarantees that were replaced by those on the Term Loan Credit Agreement. The following supplemental condensed consolidating financial information reflects (i) the Parent’s separate accounts, (ii) Par Borrower and its consolidated subsidiaries’ accounts (which are all guarantors of the Term Loan Credit Agreement), (iii) the accounts of subsidiaries of the Parent that are not guarantors of the Term Loan Credit Agreement and consolidating 44 adjustments and eliminations, and (iv) the Parent’s consolidated accounts for the dates and periods indicated. For purposes of the following condensed consolidating information, the Parent’s investment in its subsidiaries is accounted for under the equity method of accounting (dollar amounts in thousands). As of December 31, 2023 Parent Guarantor Par Borrower and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries ASSETS Current assets Cash and cash equivalents $ 10,369 $ 268,711 $ 27 $ 279,107 Restricted cash 339 — — 339 Trade accounts receivable — 367,249 — 367,249 Inventories — 1,160,395 — 1,160,395 Prepaid and other current assets 4,767 177,638 — 182,405 Due from related parties 380,159 — (380,159) — Total current assets 395,634 1,973,993 (380,132) 1,989,495 Property, plant, and equipment Property, plant, and equipment 21,350 1,552,496 3,955 1,577,801 Less accumulated depreciation and amortization (16,487) (458,616) (3,310) (478,413) Property, plant, and equipment, net 4,863 1,093,880 645 1,099,388 Long-term assets Operating lease right-of-use (“ROU”) assets 7,005 339,449 — 346,454 Refining and logistics equity investments — — 87,486 87,486 Investment in Laramie Energy, LLC — — 14,279 14,279 Investment in subsidiaries 1,070,518 — (1,070,518) — Intangible assets, net — 10,918 — 10,918 Goodwill — 126,678 2,597 129,275 Other long-term assets 726 65,323 120,606 186,655 Total assets $ 1,478,746 $ 3,610,241 $ (1,225,037) $ 3,863,950 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Current maturities of long-term debt $ — $ 4,255 $ — $ 4,255 Obligations under inventory financing agreements — 594,362 — 594,362 Accounts payable 4,991 386,334 — 391,325 Accrued taxes — 40,064 — 40,064 Operating lease liabilities — 72,833 — 72,833 Other accrued liabilities 947 415,468 5,347 421,762 Due to related parties 128,922 232,803 (361,725) — Total current liabilities 134,860 1,746,119 (356,378) 1,524,601 Long-term liabilities Long-term debt, net of current maturities — 646,603 — 646,603 Finance lease liabilities — 16,693 (4,255) 12,438 Operating lease liabilities 8,462 274,055 — 282,517 Other liabilities — 119,618 (57,251) 62,367 Total liabilities 143,322 2,803,088 (417,884) 2,528,526 Commitments and contingencies Stockholders’ equity Preferred stock — — — — Common stock 597 — — 597 Additional paid-in capital 860,797 242,505 (242,505) 860,797 Accumulated earnings (deficit) 465,856 558,581 (558,581) 465,856 Accumulated other comprehensive income (loss) 8,174 6,067 (6,067) 8,174 Total stockholders’ equity 1,335,424 807,153 (807,153) 1,335,424 Total liabilities and stockholders’ equity $ 1,478,746 $ 3,610,241 $ (1,225,037) $ 3,863,950 45 As of December 31, 2022 Parent Guarantor Par Borrower and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries ASSETS Current assets Cash and cash equivalents $ 2,547 $ 488,350 $ 28 $ 490,925 Restricted cash 331 3,670 — 4,001 Trade accounts receivable — 252,816 69 252,885 Inventories — 1,041,983 — 1,041,983 Prepaid and other current assets 2,229 89,883 (69) 92,043 Due from related parties 229,431 — (229,431) — Total current assets 234,538 1,876,702 (229,403) 1,881,837 Property, plant, and equipment Property, plant, and equipment 19,865 1,200,747 3,955 1,224,567 Less accumulated depreciation and amortization (14,967) (370,643) (3,123) (388,733) Property, plant, and equipment, net 4,898 830,104 832 835,834 Long-term assets Operating lease right-of-use (“ROU”) assets 2,649 348,112 — 350,761 Investment in subsidiaries 487,943 — (487,943) — Intangible assets, net — 13,577 — 13,577 Goodwill — 126,727 2,598 129,325 Other long-term assets 723 72,721 (4,131) 69,313 Total assets $ 730,751 $ 3,267,943 $ (718,047) $ 3,280,647 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Current maturities of long-term debt $ — $ 10,956 $ — $ 10,956 Obligations under inventory financing agreements — 893,065 — 893,065 Accounts payable 4,176 147,219 — 151,395 Accrued taxes 47 32,052 — 32,099 Operating lease liabilities 787 65,294 — 66,081 Other accrued liabilities 511 639,396 587 640,494 Due to related parties 77,420 118,139 (195,559) — Total current liabilities 82,941 1,906,121 (194,972) 1,794,090 Long-term liabilities Long-term debt, net of current maturities — 494,576 — 494,576 Finance lease liabilities — 10,710 (4,399) 6,311 Operating lease liabilities 3,273 289,428 — 292,701 Other liabilities — 46,922 1,510 48,432 Total liabilities 86,214 2,747,757 (197,861) 2,636,110 Commitments and contingencies Stockholders’ equity Preferred stock — — — — Common stock 604 — — 604 Additional paid-in capital 836,491 409,686 (409,686) 836,491 Accumulated earnings (deficit) (200,687) 104,479 (104,479) (200,687) Accumulated other comprehensive income (loss) 8,129 6,021 (6,021) 8,129 Total stockholders’ equity 644,537 520,186 (520,186) 644,537 Total liabilities and stockholders’ equity $ 730,751 $ 3,267,943 $ (718,047) $ 3,280,647 46 Year Ended December 31, 2023 Parent Guarantor Par Borrower and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries Revenues $ — $ 8,231,886 $ 69 $ 8,231,955 Operating expenses Cost of revenues (excluding depreciation) — 6,838,109 — 6,838,109 Operating expense (excluding depreciation) — 485,587 — 485,587 Depreciation and amortization 1,618 118,024 188 119,830 General and administrative expense (excluding depreciation) 29,258 62,189 — 91,447 Equity earnings from refining and logistics investments — — (11,844) (11,844) Acquisition and integration costs — 17,482 — 17,482 Par West redevelopment and other costs — 11,397 — 11,397 Loss (gain) on sale of assets, net 30 (89) — (59) Total operating expenses 30,906 7,532,699 (11,656) 7,551,949 Operating income (loss) (30,906) 699,187 11,725 680,006 Other income (expense) Interest expense and financing costs, net (24) (72,789) 363 (72,450) Debt extinguishment and commitment costs — (19,182) — (19,182) Other income (expense), net 44 (97) — (53) Equity earnings (losses) from subsidiaries 759,528 — (759,528) — Equity earnings from Laramie Energy, LLC — — 24,985 24,985 Total other income (expense), net 759,548 (92,068) (734,180) (66,700) Income (loss) before income taxes 728,642 607,119 (722,455) 613,306 Income tax benefit (expense) (1) — (153,017) 268,353 115,336 Net income (loss) $ 728,642 $ 454,102 $ (454,102) $ 728,642 Adjusted EBITDA $ (28,722) $ 709,613 $ 15,356 $ 696,247 47 Year Ended December 31, 2022 Parent Guarantor Par Borrower and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries Revenues $ — $ 7,321,656 $ 129 $ 7,321,785 Operating expenses Cost of revenues (excluding depreciation) — 6,377,494 (1,480) 6,376,014 Operating expense (excluding depreciation) — 333,206 — 333,206 Depreciation and amortization 2,131 97,448 190 99,769 General and administrative expense (excluding depreciation) 17,882 44,514 — 62,396 Acquisition and integration costs 3,396 267 — 3,663 Par West redevelopment and other costs — 9,003 — 9,003 Loss (gain) on sale of assets, net 27 (196) — (169) Total operating expenses 23,436 6,861,736 (1,290) 6,883,882 Operating income (loss) (23,436) 459,920 1,419 437,903 Other income (expense) Interest expense and financing costs, net (1) (68,655) 368 (68,288) Debt extinguishment and commitment costs — (5,329) — (5,329) Other income (expense), net (20) 634 (1) 613 Equity earnings (losses) from subsidiaries 388,008 — (388,008) — Total other income (expense), net 387,987 (73,350) (387,641) (73,004) Income (loss) before income taxes 364,551 386,570 (386,222) 364,899 Income tax benefit (expense) (1) (362) (96,995) 96,647 (710) Net income (loss) $ 364,189 $ 289,575 $ (289,575) $ 364,189 Adjusted EBITDA $ (17,551) $ 659,378 $ 1,608 $ 643,435 48 Year Ended December 31, 2021 Parent Guarantor Par Borrower and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries Revenues $ — $ 4,710,039 $ 50 $ 4,710,089 Operating expenses Cost of revenues (excluding depreciation) — 4,338,474 — 4,338,474 Operating expense (excluding depreciation) — 290,795 (717) 290,078 Depreciation and amortization 2,452 91,550 239 94,241 Impairment expense — 1,838 — 1,838 General and administrative expense (excluding depreciation) 12,435 35,661 — 48,096 Acquisition and integration costs 87 — — 87 Par West redevelopment and other costs — 9,591 — 9,591 Loss (gain) on sale of assets, net 15 (10,949) (53,763) (64,697) Total operating expenses 14,989 4,756,960 (54,241) 4,717,708 Operating income (loss) (14,989) (46,921) 54,291 (7,619) Other income (expense) Interest expense and financing costs, net (2,600) (64,209) 316 (66,493) Debt extinguishment and commitment costs — (6,728) (1,416) (8,144) Gain on curtailment of pension obligation — 2,032 — 2,032 Other income (expense), net (33) (19) — (52) Equity earnings (losses) from subsidiaries (63,649) — 63,649 — Total other income (expense), net (66,282) (68,924) 62,549 (72,657) Income (loss) before income taxes (81,271) (115,845) 116,840 (80,276) Income tax benefit (expense) (1) (26) 24,835 (25,830) (1,021) Net income (loss) $ (81,297) $ (91,010) $ 91,010 $ (81,297) Adjusted EBITDA $ (12,468) $ 137,323 $ 767 $ 125,622 ________________________________________________________ (1) The income tax benefit (expense) of the Parent Guarantor and Par Borrower and Subsidiaries is determined using the separate return method. The Non-Guarantor Subsidiaries and Eliminations column includes tax benefits recognized at the Par consolidated level that are primarily associated with changes to the consolidated valuation allowance and other deferred tax balances. 49 Non-GAAP Financial Measures Adjusted EBITDA for the supplemental consolidating condensed financial information, which is segregated at the “Parent Guarantor,” “Par Borrower and Subsidiaries,” and “Non-Guarantor Subsidiaries and Eliminations” levels, is calculated in the same manner as for the Par Pacific Holdings, Inc. Adjusted EBITDA calculations. See “Results of Operations — Non-GAAP Performance Measures — Adjusted Net Income (Loss) and Adjusted EBITDA” above. The following tables present a reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measure, net income (loss), on a historical basis for the periods indicated (in thousands): Year Ended December 31, 2023 Parent Guarantor Par Borrower and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries Net income (loss) $ 728,642 $ 454,102 $ (454,102) $ 728,642 Inventory valuation adjustment — 102,710 — 102,710 Environmental obligation mark-to-market adjustments — (189,783) — (189,783) Unrealized loss (gain) on derivatives — (49,690) — (49,690) Par West redevelopment and other costs — 11,397 — 11,397 Acquisition and integration costs — 17,482 — 17,482 Debt extinguishment and commitment costs — 19,182 — 19,182 Severance costs 492 1,293 — 1,785 Equity losses from Laramie Energy, LLC, excluding cash distributions — — (14,279) (14,279) Loss (gain) on sale of assets, net 30 (89) — (59) Depreciation and amortization 1,618 118,024 188 119,830 Interest expense and financing costs, net, excluding unrealized interest rate derivative loss (gain) 24 71,968 (363) 71,629 Laramie Energy, LLC cash distributions to Par — — (10,706) (10,706) Par's portion of interest, taxes, and depreciation expense from refining and logistics investments — — 3,443 3,443 Equity losses (income) from subsidiaries (759,528) — 759,528 — Income tax expense (benefit) — 153,017 (268,353) (115,336) Adjusted EBITDA (1) $ (28,722) $ 709,613 $ 15,356 $ 696,247 50 Year Ended December 31, 2022 Parent Guarantor Par Borrower and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries Net income (loss) $ 364,189 $ 289,575 $ (289,575) $ 364,189 Inventory valuation adjustment — (15,712) — (15,712) Environmental obligation mark-to-market adjustments — 105,760 — 105,760 Unrealized loss on derivatives — 9,336 — 9,336 Acquisition and integration costs 3,396 267 — 3,663 Debt extinguishment and commitment costs — 5,329 — 5,329 Severance costs 351 1,921 — 2,272 Loss (gain) on sale of assets, net 27 (196) — (169) Depreciation and amortization 2,131 97,448 190 99,769 Interest expense and financing costs, net, excluding unrealized interest rate derivative loss (gain) 1 68,655 (368) 68,288 Equity losses (income) from subsidiaries (388,008) — 388,008 — Income tax expense (benefit) 362 96,995 (96,647) 710 Adjusted EBITDA (1) $ (17,551) $ 659,378 $ 1,608 $ 643,435 Year Ended December 31, 2021 Parent Guarantor Par Borrower and Subsidiaries Non-Guarantor Subsidiaries and Eliminations Par Pacific Holdings, Inc. and Subsidiaries Net income (loss) $ (81,297) $ (91,010) $ 91,010 $ (81,297) Inventory valuation adjustment — 31,841 — 31,841 Environmental obligation mark-to-market adjustments — 66,350 — 66,350 Unrealized gain on derivatives — (1,393) — (1,393) Acquisition and integration costs 87 — — 87 Debt extinguishment and commitment costs — 6,728 1,416 8,144 Severance costs — 84 — 84 Impairment expense — 1,838 — 1,838 Loss (gain) on sale of assets, net 15 (10,949) (53,763) (64,697) Depreciation and amortization 2,452 91,550 239 94,241 Interest expense and financing costs, net, excluding unrealized interest rate derivative loss (gain) 2,600 67,119 (316) 69,403 Equity losses (income) from subsidiaries 63,649 — (63,649) — Income tax expense (benefit) 26 (24,835) 25,830 1,021 Adjusted EBITDA (1) $ (12,468) $ 137,323 $ 767 $ 125,622 ________________________________________________________ (1) Please read the Non-GAAP Performance Measures and Adjusted Net Income (Loss) and Adjusted EBITDA discussions above for information regarding the components of Adjusted Net Income (Loss) and Adjusted EBITDA. Liquidity and Capital Resources Capital Resources and Available Liquidity Our liquidity and capital requirements are primarily a function of our debt maturities and debt service requirements and contractual obligations, capital expenditures, turnaround outlays, and working capital needs. Examples of working capital needs include purchases and sales of commodities and associated margin and collateral requirements, facility maintenance costs, and other costs such as payroll. Our primary sources of liquidity are cash flows from operations, cash on hand, amounts available under our credit agreements, and access to capital markets. 51 Our liquidity position as of December 31, 2023 was $644.5 million that consisted of $279.1 million of cash and cash equivalents, $355.0 million of availability under the ABL Credit Facility, and $10.4 million of availability under the J. Aron Discretionary Draw Facility. In addition, we had the ability to issue letters of credit of up to $107 million under our LC Facility. As of December 31, 2023, we had access to the ABL Credit Facility, the LC Facility, the J. Aron Discretionary Draw Facility, and cash on hand of $279.1 million. In addition, we have the Supply and Offtake Agreement, 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, for payments related to acquisitions, and to repay or refinance indebtedness. We believe our cash flows from operations and available capital resources will be sufficient to meet our current capital and turnaround expenditures, working capital, and debt service requirements for the next 12 months. We may seek to raise additional debt or equity capital to fund acquisitions and any other significant changes to our business or to refinance existing debt. We cannot offer any assurances that such capital will be available in sufficient amounts or at an acceptable cost. Significant Developments In the first quarter of 2021, we closed on the sale and leaseback of twenty-two (22) of our retail properties in Hawaii for an aggregate cash purchase price of approximately $112.8 million net of transaction fees (the “Sale-Leaseback Transactions”). We used approximately $53.1 million of the net cash proceeds to repay the certain financing arrangements which were related to certain of the retail properties and the remainder for general corporate purposes. Please read Note 17—Leases to our consolidated financial statements under Item 8 of this Form 10-K for additional discussion on the Sale-Leaseback Transactions. On March 19, 2021, we sold 5.75 million shares of common stock in an underwritten public offering at a public offering price of $16.00 per share, resulting in net proceeds of approximately $87.2 million (the “Equity Offering”), after deducting underwriting discounts and commissions and offering expenses. We used the net proceeds from the Equity Offering to repay the remaining $48.7 million in aggregate principal amount of 5.00% Convertible Senior Notes at maturity in June 2021 and $36.8 million in aggregate principal amount of 12.875% Senior Secured Notes, and the remainder for other general corporate purposes, including capital expenditures, and funding working capital. Please read Note 19—Stockholders’ Equity to our consolidated financial statements under Item 8 of this Form 10-K for additional discussion on the Equity Offering. On April 26, 2023, we terminated the Prior ABL Credit Facility and entered into a new ABL Credit Facility. On June 1, 2023 we closed the Billings Acquisition; please read Note 5—Acquisitions to our consolidated financial statements under Item 8 of this Form 10-K for further information. On July 26, 2023, we entered into the July 2023 S&O Amendment in connection with a new LC Facility. On October 4, 2023, we entered into the Second Amendment to the ABL Credit Facility and terminated the Washington Refinery Intermediation Agreement. During the years ended December 31, 2023, 2022, and 2021, we had significant activity related to our inventory financing and debt agreements. Please read Note 12—Inventory Financing Agreements and Note 14—Debt to our consolidated financial statements under Item 8 of this Form 10-K for further discussion of significant activity related to our inventory financing and debt agreements, respectively. Other Sources of Liquidity We may from time to time seek to retire or purchase our common stock through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions, or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors. The amounts involved may be material. On November 10, 2021, the Board authorized and approved a share repurchase program for up to $50 million of the currently outstanding shares of our common stock, with no specified end date. On August 2, 2023, the Board approved expanding the Company’s share repurchase authorization from $50 million to $250 million. Please read Note 19—Stockholders’ Equity to our consolidated financial statements under Item 8 of this Form 10-K for additional discussion on the share repurchase program. 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 leverage ratio (as defined in the Term Loan Credit Agreement). 52 Cash Flows The following table summarizes cash activities for the years ended December 31, 2023, 2022, and 2021 (in thousands): Years Ended December 31, 2023 2022 2021 Net cash provided by (used in) operating activities $ 579,156 $ 452,606 $ (27,622) Net cash provided by (used in) investing activities (659,039) (87,308) 74,628 Net cash provided by (used in) financing activities (135,597) 13,407 (1,094) Cash flows for the year ended December 31, 2023 Net cash provided by operating activities for the year ended December 31, 2023 was driven primarily by net income of $728.6 million, non-cash earnings from operations of approximately $53.2 million, and net cash used for changes in operating assets and liabilities of approximately $96.3 million. Non-cash earnings from operations consisted primarily of the following adjustments: • depreciation and amortization expenses of $119.8 million, • debt commitment and extinguishment costs of $19.2 million, and • stock based compensation costs of $11.6 million, partially offset by • a benefit from deferred taxes of $126.3 million, • unrealized gain on derivatives contracts of $49.7 million, • a gain of $25.0 million from our equity investment in Laramie Energy, and • $11.8 million of non-cash equity earnings from our refining and logistics investments. Net cash used for changes in operating assets and liabilities resulted primarily from: • a decrease in gross environmental credit obligations primarily related to the settlement of our 2020, 2021, and 2022 RINs obligations, and • increase in prepaid and other primarily driven by a $65.5 million increase in Advances to suppliers for crude purchases. Net cash used in investing activities for the year ended December 31, 2023 consisted primarily of: • $595.4 million used for the Billings Acquisition, and • $82.3 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. 53 Net cash used in financing activities was approximately $135.6 million for the year ended December 31, 2023 and consisted primarily of the following activities: • net repayments under the Discretionary Draw Facility and MLC receivable advances of $96.0 million, • aggregate payments of $23.1 million of deferred loan costs and debt extinguishment costs, related to our debt refinancing, and • repurchases of common stock of $67.8 million, partially offset by • net borrowings of debt of $145.1 million primarily driven by the refinancing and consolidation of our debt. Cash flows for the year ended December 31, 2022 Net cash provided by operating activities for the year ended December 31, 2022, was primarily driven by net income of approximately $364.2 million, non-cash charges to operations of approximately $127.6 million, and net cash used for changes in operating assets and liabilities of approximately $39.2 million. Non-cash charges to operations consisted primarily of the following adjustments: • depreciation and amortization expenses of $99.8 million, • stock based compensation costs of $9.4 million, • unrealized loss on derivatives contracts of $9.3 million, and • debt commitment and extinguishment costs of $5.3 million. Net cash used for changes in operating assets and liabilities resulted primarily from: • net increases in our Supply and Offtake Agreement and Washington Refinery Intermediation Agreement obligations and accounts payable, and • an increase in gross environmental credit obligations primarily related to current period production volumes and increases in RINs prices, partially offset by • net increases in our inventories and accounts receivable resulting from higher crude oil and refined product prices and higher inventory volumes at our Hawaii refinery, and • increase in prepaid and other primarily driven by a $34.7 million increase in Collateral posted with broker for derivative instruments. Net cash used in investing activities for the year ended December 31, 2022 consisted primarily of: • $53.0 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 and tank replacement projects at our Wyoming refinery, and co-generation engine and tank conversion projects at our Hawaii refinery, and • $35.5 million related to acquisitions, primarily comprised of a $30.0 million deposit on the Billings Acquisition and $5.5 million for a three-store expansion of our Washington retail footprint. Net cash provided by financing activities for the year ended December 31, 2022 was approximately $13.4 million and and consisted primarily of the following activities: 54 • net borrowings under the J. Aron Discretionary Draw Facility and MLC receivable advances of $80.7 million, partially offset by • net repayments of debt of $62.0 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 $7.8 million. Cash flows for the year ended December 31, 2021 Net cash used in operating activities was approximately $27.6 million for the year ended December 31, 2021, which resulted from a net loss of approximately $81.3 million, partially offset by non-cash charges to operations of approximately $41.6 million and net cash provided by changes in operating assets and liabilities of approximately $12.1 million. Net cash provided by investing activities was approximately $74.6 million for the year ended December 31, 2021 and was primarily related to proceeds received from the Sale-Leaseback Transactions partially offset by additions to property, plant, and equipment totaling approximately $29.5 million. Net cash used in financing activities for the year ended December 31, 2021 was approximately $1.1 million and consisted primarily of proceeds of $87.2 million from our March 2021 equity offering of common stock partially offset by net repayments on our debt agreements, J. Aron deferred payment arrangement, and MLC receivable advances of $81.4 million and $5.6 million in extinguishment costs related to the repayment of the Retail Property Term Loan and a portion of the 12.875% Senior Secured Notes. Cash Requirements We have various cash requirements stemming from investment strategies, contractual obligations, and financial commitments in the normal course of our operations and financing activities. Contractual obligations include future cash payments required under existing contractual arrangements, such as debt and lease agreements. These cash requirements and obligations may result from both general financing activities and from commercial arrangements that are directly related to our operating activities. We also continue to seek strategic investments in business opportunities, however the amount and timing of those investments are not predictable. Our material cash requirements as of December 31, 2023 include: Debt and Interest Payments. Current and long-term debt includes the scheduled principal payments related to our outstanding debt obligations and ABL Credit Facility. Our estimated interest payments due for 2024 are $51.2 million and our total estimated undiscounted future interest payments will be $312.4 million on the debt obligations held as of December 31, 2023 and using interest rates in effect as of December 31, 2023. Please read Note 14—Debt to our consolidated financial statements under Item 8 of this Form 10-K for further discussion. Debt Refinancing. On February 28, 2023, we entered into the Term Loan Credit Agreement. 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 December 31, 2023, our estimated undiscounted future interest payments increased to $310 million. On April 26, 2023, we terminated the prior ABL Credit Facility and entered into a new ABL Credit Facility. On October 4, 2023, we terminated the Washington Refinery Intermediation Agreement in connection with the Second Amendment to the ABL Credit Facility that increased the borrowing base. Please read Note 14—Debt to our consolidated financial statements under Item 8 of this Form 10-K for further discussion. Capital Expenditures and Turnaround Costs. Our deferred turnaround costs and capital expenditures, including land and building purchases but excluding acquisitions, for the year ended December 31, 2023, totaled approximately $88.1 million and were primarily related to the 2023 turnaround and related scheduled maintenance work at our Montana refinery, capital projects at our Hawaii and Tacoma refineries, land purchases and new sites at our Retail and Hawaii Logistics businesses, and sustaining maintenance at each of our refineries. Our capital expenditures and deferred turnaround costs budget for 2024 is approximately $220 to $250 million and primarily relates to scheduled maintenance, capital projects, and turnaround projects related to regulatory compliance, information technology, and growth across each of our businesses. Operating Lease Liabilities. Operating lease liabilities primarily include obligations associated with the lease of land, office space, retail facilities, and other facilities used in the storage and transportation of crude oil and refined products. Please read Note 17—Leases to our consolidated financial statements under Item 8 of this Form 10-K for further discussion. 55 Finance Lease Liabilities. Finance lease liabilities primarily include obligations associated with the lease of retail facilities and vehicles. Please read Note 17—Leases to our consolidated financial statements under Item 8 of this Form 10-K for further discussion. Purchase Commitments. Purchase commitments primarily consist of contracts executed as of December 31, 2023 for the purchase of crude oil for use at our refineries that are scheduled for delivery in 2024. As of December 31, 2023, we have material purchase commitments of $1.3 billion, with required cash outlays primarily expected in the next twelve months. Supply and Offtake Agreement. On June 1, 2021, we and J. Aron entered into the second amended and restated supply and offtake agreement which expires on May 31, 2024. We and J. Aron entered into amendments to the Supply and Offtake Agreement on April 25, 2022, and May 17, 2022, which, among other things, increased the capacity under the Discretionary Draw Facility. On July 26, 2023, we entered into the July 2023 S&O Amendment to the Supply and Offtake Agreement which, among other things, allowed PHR to enter into a crude oil procurement contract supported by a letter of credit under the LC Facility and have its purchases funded by J. Aron, subject to certain conditions. Please read Note 12—Inventory Financing Agreements to our consolidated financial statements under Item 8 of this Form 10-K for more information. LC Facility. On July 26, 2023, we entered into an LC Facility intended to finance and provide credit support for certain of PHR’s purchases of crude oil. In addition, revolving credit loans may be used to pay suppliers. The amount available is $120.0 million with the right to request an increase up to $350.0 million in the aggregate, subject to certain conditions. Please read Note 12—Inventory Financing Agreements to our consolidated financial statements under Item 8 of this Form 10-K for more information. Environmental Matters. Our operations are subject to extensive and periodically-changing federal, state, and local environmental laws and regulations including but not limited to air emissions, wastewater discharges, and solid and hazardous waste management activities. Additionally, we have asset retirement obligations in the period in which we have a legal obligation, whether by government or regulatory action or contractual arrangement, to incur these costs and can make a reasonable estimate of the fair value of the liability. Please read Note 10—Asset Retirement Obligations and Note 18—Commitments and Contingencies to our consolidated financial statements under Item 8 of this Form 10-K for more information. Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations were based on the consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements required us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. Our significant accounting policies are described in our audited consolidated financial statements under Item 8 of this Form 10-K. We have identified certain estimates as being of particular importance to the portrayal of our financial position and results of operations and which require the application of significant judgment by management. We analyze our estimates on a periodic basis, including those related to fair value, impairments, natural gas and crude oil reserves, bad debts, natural gas and oil properties, income taxes, derivatives, contingencies, and litigation and base our estimates on historical experience and various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. Inventory and Obligations Under Inventory Financing Agreements Commodity inventories, excluding commodity inventories at the Washington refinery, are stated at the lower of cost and net realizable value using the FIFO accounting method. Commodity inventories at the Washington refinery are stated at the lower of cost and net realizable value using the LIFO inventory accounting method. We value merchandise along with spare parts, materials, and supplies at weighted average cost. Estimating the net realizable value of our inventory requires management to make assumptions about the timing of sales and the expected proceeds that will be realized for these sales. Please read Note 7—Inventories to our consolidated financial statements under Item 8 of this Form 10-K for additional information. A portion of the crude oil utilized at the Hawaii refinery is financed by J. Aron under procurement contracts. The crude oil remains in the legal title of J. Aron and is stored in our storage tanks governed by a storage agreement. Legal title to the crude oil passes to us at the tank outlet. After processing, J. Aron takes title to the refined products stored in our storage tanks until they are sold to our retail locations or to third parties. We record the inventory owned by J. Aron on our behalf as inventory with a corresponding accrued liability on our balance sheet because we maintain the risk of loss until the refined products are sold to third parties and we have an obligation to repurchase it. The valuation of our repurchase obligation requires that we make estimates of the prices and differentials assuming settlement occurs at the end of the reporting period. 56 On July 26, 2023, we entered into an LC Facility, intended to finance and provide credit support for certain of PHR’s purchases of crude oil. In addition, revolving credit loans may be used to pay suppliers. The amount available is $120.0 million with the right to request an increase up to $350.0 million in the aggregate, subject to certain conditions. Please read Note 12—Inventory Financing Agreements to our consolidated financial statements under Item 8 of this Form 10-K for additional information regarding our Hawaii inventory financing agreement and LC Facility. Fair Value Measurements We measure certain assets and liabilities at their fair market value. Assets and liabilities measured at fair value on a recurring basis include derivative instruments and environmental credit obligations. We also measure certain assets and liabilities at fair value on a nonrecurring basis when specific triggering events occur, such as business combinations and events which indicate that a reporting unit’s carrying value exceeds its estimated fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. In estimating fair value, we use discounted cash flow projections, recent comparable market transactions, if available, or quoted prices. We consider assumptions that third parties would make in estimating fair value, including the highest and best use of the asset. The assumptions used by another party could differ significantly from our assumptions. We classify fair value balances based on the classification of the inputs used to calculate the fair value of a transaction. The inputs used to measure fair value have been placed in a hierarchy based on priority. The hierarchy gives the highest priority to unadjusted, readily observable quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). Please read Note 16—Fair Value Measurements to our consolidated financial statements under Item 8 of this Form 10-K for additional information. Business Combinations We recognize assets acquired and liabilities assumed in business combinations separately from goodwill at their estimated fair values as of the date of acquisition. Significant judgment is required in estimating the fair value of assets acquired. We obtain the assistance of third-party valuation specialists in estimating fair values of tangible and intangible assets based on available historical information and on expectations and assumptions about the future, considering the perspectives of marketplace participants. These valuation methods require management to make estimates and assumptions regarding characteristics of the acquired property and future revenues and expenses. Changes in these estimates and assumptions would result in different amounts allocated to the related assets and liabilities. The measurement period may be up to one year from the acquisition date; we may record adjustments to the preliminary purchase price allocation during this time, concluding at the end of the one year period or final determination of the values of consideration transferred and assets and liabilities assumed, whichever comes first. Subsequent adjustments, if any, are recorded to the consolidated statement of operations. Please read Note 5—Acquisitions and Note 16—Fair Value Measurements to our consolidated financial statements under Item 8 of this Form 10-K for further information. Impairment of Goodwill and Long-lived Assets We assess the recoverability of the carrying value of goodwill during the fourth quarter of each year or whenever events or changes in circumstances indicate that the carrying amount of the goodwill of a reporting unit may not be fully recoverable. We first assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the qualitative assessment indicates that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, a quantitative test is required. Under the quantitative test, we compare the carrying value of the net assets of the reporting unit to the estimated fair value of the reporting unit. If the carrying value exceeds the estimated fair value of the reporting unit, an impairment loss is recorded. The fair value of a reporting unit is determined using the income approach and the market approach. Under the income approach, we estimate the present value of expected future cash flows using a market participant discount rate. Under the market approach, we estimate fair value using observable multiples for comparable companies within our industry. These valuation methods require us to make significant estimates and assumptions regarding future cash flows, capital projects, commodity prices, long-term growth rates, and discount rates. Please read Note 11—Goodwill and Intangible Assets to our consolidated financial statements under Item 8 of this Form 10-K for further information. We review property, plant, and equipment, operating leases, and other long-lived assets whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable. We use a cash flows model to estimate value because there is usually a lack of quoted market prices available for long-lived assets. Future cash flow estimates used for impairment reviews are based on assessments requiring judgment, including future production volumes, commodity prices, operating costs, margins, discount rates, expected capital expenditures, and other factors based on all available information 57 available as of the date of the review. Impairment is required when the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying value. If this occurs, an impairment loss is recognized for the difference between the fair value and carrying value. The fair value of long-lived assets is determined using the income approach. Please read Note 9—Property, Plant, and Equipment and Impairment of Long-Lived Assets to our consolidated financial statements under Item 8 of this Form 10-K for further information. Environmental Matters and Asset Retirement Obligations We record liabilities when environmental assessments and/or remedial efforts are probable and can be reasonably estimated. Cost estimates are based on the expected timing and extent of remedial actions required by governing agencies, experience gained from similar sites for which environmental assessments or remediation have been completed, and the amount of our anticipated liability considering the proportional liability and financial abilities of other responsible parties. Usually, the timing of these accruals coincides with the completion of a feasibility study or our commitment to a formal plan of action. Please read Note 18—Commitments and Contingencies to our consolidated financial statements under Item 8 of this Form 10-K for further information about our environmental liabilities and assessments. We record asset retirement obligations (“AROs”) at fair value in the period in which we have a legal obligation, whether by government action or contractual arrangement, to incur these costs and can make a reasonable estimate of the fair value of the liability. Estimating the cost and timing of future remedial efforts is difficult and related technologies, costs, regulatory and other compliance considerations, timing, discount rates, and other inputs considered in the valuations are subject to change. Please read Note 2—Summary of Significant Accounting Policies, “Asset Retirement Obligations,” to our consolidated financial statements under Item 8 of this Form 10-K for further information. Income Taxes We use the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and NOL and tax credit carry forwards. The realizability of deferred tax assets is evaluated quarterly based on a “more likely than not” standard and, to the extent this threshold is not met, a valuation allowance is recorded. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. These liabilities are recorded based on our assessment of existing tax laws and regulations. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which these temporary differences become deductible and may vary from our estimates for a number of reasons, including different interpretations of tax laws and regulations. New tax laws and regulations, and changes to existing tax laws and regulations, are proposed and promulgated continuously. The implementation of future tax laws and regulatory initiatives, as well as future interpretations on historical tax laws and regulations, could result in increased tax liabilities that cannot be predicted at this time. Please read Note 2—Summary of Significant Accounting Policies, “Income Taxes,” to our consolidated financial statements under Item 8 of this Form 10-K for further information. In the fourth quarter of 2023, we analyzed projections for our future taxable income and the absence of objective negative evidence, such as a cumulative loss in recent years. As a result of this analysis, we determined that we have sufficient positive evidence to release a majority of the valuation allowance against our federal net deferred tax assets and recognized a non-cash deferred tax benefit of $277.7 million for the year ended December 31, 2023. We retain a partial valuation allowance on certain state deferred tax assets primarily as a result of apportionment factors from minimal activity in certain states impacting assessed likelihood of future realizability. We will continue to reassess whether the balance of the valuation allowance is appropriate on a quarterly basis and, given the totality of the facts and circumstances, both positive and negative, will adjust the remaining valuation allowance in future periods if the evidence supports doing so.