PAR PACIFIC HOLDINGS, INC. Overview
We are a growth-oriented company based in
Our business is organized into three primary segments: 1) Refining - We own and operate four refineries, including one idled refinery, with total operating throughput capacity of over 150 Mbpd inHawaii ,Wyoming , andWashington . 2) Retail - Our retail outlets inHawaii ,Washington , andIdaho sell gasoline, diesel, and retail merchandise through Hele and "76" branded sites, "nomnom" branded company-operated convenience stores,7-Eleven operated convenience stores, other sites operated by third parties, and unattended cardlock stations. ThroughMarch 31, 2021 , we completed the rebranding of all company-operated convenience stores inWashington andIdaho to "nomnom," our proprietary brand. 3) Logistics - We operate an extensive multi-modal logistics network spanning the Pacific, the Northwest, and the Rockies regions that primarily transports and stores crude oil and refined products for our refineries and transports refined products to our retail sites or third-party purchasers. As ofMarch 31, 2021 , we owned a 46.0% equity investment in Laramie Energy. Laramie Energy is focused on producing natural gas inGarfield ,Mesa , andRio Blanco Counties,Colorado . We have four reportable segments: (i) Refining, (ii) Retail, (iii) Logistics, and (iv) Corporate and Other. Our Corporate and Other reportable segment primarily includes general and administrative costs. Please read Note 17-Segment Information to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for detailed information on our operating results by segment. Recent Events Affecting Comparability of Periods The spread of COVID-19, in conjunction with related government and other preventative measures taken to mitigate the spread of the virus, has caused severe disruptions in the worldwide economy, including the global demand for crude oil and refined products, the movement of people and goods inthe United States , and the global supply chain for industrial and commercial production, all of which have in turn disrupted our businesses and operations. InDecember 2020 andFebruary 2021 , theU.S. Food & Drug Administration granted Emergency Use Authorization ("EUA") for three vaccines to be distributed inthe United States . OnApril 2, 2021 , theCenters for Disease Control and Prevention ("CDC") announced that individuals who are fully vaccinated can travel domestically at low risk to themselves, though they should still wear masks and adhere to social distancing guidelines and travel is still not recommended. In addition to measures we took in 2020 in response to the COVID-19 pandemic, as described in our Annual Report on Form 10-K for the year endedDecember 31, 2020 , we have also undertaken additional liquidity-enhancing measures, including deferring or delaying certain capital expenditures related to turnaround activities at ourWashington refinery . We closed sale-leaseback transactions in the first quarter of 2021, in which we sold twenty-two (22) retail convenience store/fuel station properties located inHawaii (the "Sale-Leaseback Properties ") for a net purchase price of$112.8 million . We also entered into a lease on the properties for fifteen (15) years, unless earlier terminated, with up to four 5-year renewal options. OnMarch 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 to us of approximately$87.4 million , after deducting underwriting discounts and commissions and offering expenses. We believe the steps we have taken throughout 2020 and more recently in the first quarter of 2021 have strengthened our ability to conduct our operations through current conditions. We are also utilizing some of the tax payment deferral opportunities and federal refund acceleration opportunities provided by the Internal Revenue Service ("IRS"), Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), and various state-specific provisions. We continue to maintain existing processes and procedures, including but not limited to processes and procedures around protection of our technology systems and proprietary data, even though a significant number of our employees are working from home. The health and wellbeing of our employees and customers continue to be our top priorities as we continue navigating the challenges presented by the COVID-19 pandemic. 28 -------------------------------------------------------------------------------- The financial results contained in this Quarterly Report on Form 10-Q reflect the continuing pandemic-related demand suppression experienced in the first quarter of 2021 in the regions in which we operate. Though vaccine availability is increasing, the COVID-19 pandemic is ongoing and the impacts of the virus on people and businesses continue to evolve as of the date of this report. We continue to actively monitor the impact of the global situation on our people, operations, financial condition, liquidity, suppliers, customers, and industry. Due to the rapid development and fluidity of the situation, the full magnitude of the impact of COVID-19 on our financial condition, future results of operations, and future cash flows and liquidity is uncertain and has been and may continue to be material. Results of Operations Three months endedMarch 31, 2021 compared to the three months endedMarch 31, 2020 Net Loss. Our financial results for the first quarter of 2021 improved from a net loss of$222.3 million for the three months endedMarch 31, 2020 to a net loss of$62.2 million for the three months endedMarch 31, 2021 . The increase was primarily driven by a gain of$64.9 million primarily related to the Sale-Leaseback Transaction we closed onFebruary 23, 2021 andMarch 12, 2021 , our 2020 goodwill impairment of$67.9 million related to our Refining and Retail segments, and our 2020 other-than-temporary impairment of$45.3 million related to our equity investment in Laramie Energy, and a$193.0 million favorable change in lower of cost or net realizable value adjustments, partially offset by a 28% decrease in refining sales volumes, unfavorable crack spreads primarily due to decreased demand as a result of the COVID-19 pandemic, and an increase in the RINs mark-to-market expense driven by higher RINs prices. Adjusted EBITDA and Adjusted Net Loss. For the three months endedMarch 31, 2021 , Adjusted EBITDA was a loss of$43.3 million compared to earnings of$13.7 million for the three months endedMarch 31, 2020 . The decrease was primarily related to unfavorable crack spreads and lower sales volumes across our operating segments related to COVID-19 demand destruction, and RINs mark-to-market expense driven by higher RINs prices, partially offset by favorable feedstock costs inHawaii . For the three months endedMarch 31, 2021 , Adjusted Net Loss was a loss of$84.4 million compared to a loss of$27.3 million for the three months endedMarch 31, 2020 . The decrease was primarily related to the factors described above for the decrease in Adjusted EBITDA. 29 -------------------------------------------------------------------------------- The following tables summarize our consolidated results of operations for the three months endedMarch 31, 2021 compared to the three months endedMarch 31, 2020 (in thousands). The following should be read in conjunction with our condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Three Months Ended March 31, 2021 2020 $ Change % Change (1) Revenues$ 888,680 $ 1,204,083 $ (315,403) (26) % Cost of revenues (excluding depreciation) 888,863 1,210,211 (321,348) (27) % Operating expense (excluding depreciation) 74,188 73,391 797 1 % Depreciation, depletion, and amortization 22,880 21,283 1,597 8 % Impairment expense - 67,922 (67,922) (100) % Loss (gain) on sale of assets, net (64,912) - (64,912) NM General and administrative expense (excluding depreciation) 11,885 11,784 101 1 % Acquisition and integration costs 438 665 (227) (34) % Total operating expenses 933,342 1,385,256 Operating loss (44,662) (181,173) Other income (expense) Interest expense and financing costs, net (18,151) (18,674) 523 3 % Debt extinguishment and commitment costs (1,507) - (1,507) NM Gain on curtailment of pension obligation 2,032 - 2,032 NM Other income, net 61 24 37 154 % Change in value of common stock warrants - 4,270 (4,270) (100) % Equity losses from Laramie Energy, LLC - (45,031) 45,031 100 % Total other income (expense), net (17,565)
(59,411)
Loss before income taxes (62,227)
(240,584)
Income tax benefit (expense) - 18,247 (18,247) (100) % Net loss$ (62,227) $ (222,337)
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(1) NM - Not meaningful
The following tables summarize our operating income (loss) by segment for the three months endedMarch 31, 2021 and 2020 (in thousands). The following should be read in conjunction with our condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Corporate, Eliminations and Three months ended March 31, 2021 Refining Logistics Retail Other (1) Total Revenues$ 838,755 $ 41,309 $ 91,188 $ (82,572) $ 888,680 Cost of revenues (excluding depreciation) 883,477 22,082 65,872 (82,568) 888,863 Operating expense (excluding depreciation) 53,338 3,896 16,954 - 74,188 Depreciation, depletion, and amortization 14,064 5,254 2,660 902 22,880 Impairment expense - - - - - Loss (gain) on sale of assets, net (21,259) - (43,653) - (64,912) General and administrative expense (excluding depreciation) - - - 11,885 11,885 Acquisition and integration costs - - - 438 438 Operating income (loss)$ (90,865) $ 10,077 $ 49,355 $ (13,229) $ (44,662) 30
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Corporate,
Eliminations and
Three months ended March 31, 2020 Refining Logistics Retail Other (1) Total
Revenues $ 1,148,126 $ 59,150 $ 102,813 $ (106,006) $ 1,204,083
Cost of revenues (excluding
depreciation) 1,213,353 31,436 71,430 (106,008) 1,210,211
Operating expense (excluding
depreciation) 52,244 4,271 16,876 - 73,391
Depreciation, depletion, and
amortization 12,994 4,667 2,799 823 21,283
Impairment expense 38,105 - 29,817 - 67,922
Loss (gain) on sale of assets, net - - - - -
General and administrative expense
(excluding depreciation) - - - 11,784 11,784
Acquisition and integration costs - - - 665 665
Operating income (loss) $ (168,570) $ 18,776 $ (18,109) $ (13,270) $ (181,173) ________________________________________________________
(1)Includes eliminations of intersegment Revenues and Cost of revenues
(excluding depreciation) of
31
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Below is a summary of key operating statistics for the refining segment for
the three months ended
Three Months Ended March 31,
2021 2020
Total Refining Segment
Feedstocks Throughput (Mbpd) 127.4 151.5
Refined product sales volume (Mbpd) 130.0 179.7
Hawaii Refineries
Combined Feedstocks Throughput (Mbpd) 81.2 94.9
Par East Throughput (Mbpd) 81.2 69.8
Par West Throughput (Mbpd) - 25.1
Yield (% of total throughput)
Gasoline and gasoline blendstocks 24.7 % 24.7 %
Distillates 42.9 % 48.1 %
Fuel oils 27.6 % 22.3 %
Other products 1.5 % 0.6 %
Total yield 96.7 % 95.7 %
Refined product sales volume (Mbpd)
On-island sales volume 77.7 119.5
Exports sales volume - -
Total refined product sales volume 77.7 119.5
Adjusted Gross Margin per bbl ($/throughput bbl) (1) $ (0.46)
$ 0.24
Production costs per bbl ($/throughput bbl) (2) 3.97 3.36
DD&A per bbl ($/throughput bbl) 0.68 0.33
Washington Refinery
Feedstocks Throughput (Mbpd) 31.6 40.9
Yield (% of total throughput)
Gasoline and gasoline blendstocks 24.5 % 23.4 %
Distillates 36.2 % 35.5 %
Asphalt 18.0 % 18.0 %
Other products 18.7 % 19.4 %
Total yield 97.4 % 96.3 %
Refined product sales volume (Mbpd) 39.2 43.7
Adjusted Gross Margin per bbl ($/throughput bbl) (1) $ (1.33)
$ 9.94
Production costs per bbl ($/throughput bbl) (2) 4.36 3.40
DD&A per bbl ($/throughput bbl) 1.77 1.42
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Three Months Ended March 31,
2021 2020
Wyoming Refinery
Feedstocks Throughput (Mbpd) 14.6 15.7
Yield (% of total throughput)
Gasoline and gasoline blendstocks 49.0 % 51.0 %
Distillates 45.0 % 44.7 %
Fuel oils 1.4 % 1.6 %
Other products 1.2 % 0.6 %
Total yield 96.6 % 97.9 %
Refined product sales volume (Mbpd) 13.1 16.5
Adjusted Gross Margin per bbl ($/throughput bbl) (1) $ 2.35
$ (0.81) Production costs per bbl ($/throughput bbl) (2) 8.10 6.51 DD&A per bbl ($/throughput bbl) 3.11 3.40
Market Indices (average $ per barrel)
3-1-2 Singapore Crack Spread (3) $ 3.80 $ 8.11 Pacific Northwest 5-2-2-1 Index (4) 11.46 13.24 Wyoming 3-2-1 Index (5) 20.97 15.86 Crude Oil Prices ($ per barrel) Brent $ 61.32$ 50.82 WTI 58.14 45.98 ANS 61.65 52.27 Bakken Clearbrook 57.60 42.67 WCS Hardisty 46.16 27.96 Brent M1-M3 0.81 (0.54)
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(1)We calculate Adjusted Gross Margin per barrel by dividing Adjusted Gross Margin by total refining throughput. Adjusted Gross Margin for ourWashington 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. Please see discussion of Adjusted Gross Margin below. (2)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 condensed consolidated statement of operations, which also includes costs related to our bulk marketing operations. (3)In 2020, following the implementation of IMO 2020, we established 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)) as a new benchmark for ourHawaii operations. By removing the high sulfur fuel oil reference in the index, we believe the 3-1-2 Singapore Crack Spread is the most representative market indicator of our current operations inHawaii . (4)We believe thePacific Northwest 5-2-2-1 Index is the most representative market indicator for our operations inTacoma, Washington . ThePacific Northwest 5-2-2-1 Index is computed by taking two parts gasoline (sub-octane), two parts middle distillates (ULSD and jet fuel), and one part fuel oil as created from five barrels of Alaskan North Slope ("ANS") crude oil. 33 -------------------------------------------------------------------------------- (5)The profitability of ourWyoming refinery is heavily influenced by crack spreads in nearby markets. We believe theWyoming 3-2-1 Index is the most representative market indicator for our operations inWyoming . TheWyoming 3-2-1 Index is computed by taking two parts gasoline and one part distillates (ULSD) as created from three barrels of West Texas Intermediate Crude Oil ("WTI"). Pricing is based 50% on applicable product pricing inRapid City, South Dakota , and 50% on applicable product pricing inDenver, Colorado .
Below is a summary of key operating statistics for the retail segment for the
three months ended
Three Months Ended
2021 2020
Retail Segment
Retail sales volumes (thousands of gallons) 24,801 28,441
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 a substitute for, or superior to, measures of financial performance
prepared in accordance with GAAP and our calculations thereof may not be
comparable to similarly titled measures reported by other companies.
Adjusted Gross Margin
Adjusted Gross Margin is defined as (i) operating income (loss) plus operating
expense (excluding depreciation), impairment expense, 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, and purchase price allocation adjustments), depreciation,
depletion, and amortization ("DD&A"); Renewable Identification Numbers ("RINs")
loss (gain) in excess of net obligation (which represents the income statement
effect of reflecting our RINs liability on a net basis), (gain) loss on sale of
assets, and unrealized loss (gain) on derivatives or (ii) revenues less cost of
revenues (excluding depreciation) plus inventory valuation adjustment,
unrealized loss (gain) on derivatives, and RINs loss (gain) in excess of net
obligation. We define cost of revenues (excluding depreciation) as the
hydrocarbon-related costs of inventory sold, transportation costs of delivering
product to customers, crude oil consumed in the refining process, costs to
satisfy our RINs and environmental credit obligations, and certain hydrocarbon
fees and taxes. Cost of revenues (excluding depreciation) also includes the
unrealized gain (loss) on derivatives and the inventory valuation adjustment
that we exclude from Adjusted Gross Margin. Beginning in the second quarter of
2020, Adjusted Gross Margin also includes the contango gains and backwardation
losses associated with our Washington inventory and intermediation obligation.
Prior to 2020, contango gains and backwardation (losses) captured by our
Washington intermediation agreement were excluded from Adjusted Gross Margin (as
part of the inventory valuation adjustment). This change to our non-GAAP
information was made to reflect the favorable or unfavorable impact of the
market structure on the profitability of our Washington refinery consistent with
the presentation of such impacts on our other refineries. Also beginning in the
third quarter of 2020, Adjusted Gross Margin excludes the LIFO layer liquidation
impacts associated with our Washington inventory. We have recast the non-GAAP
information for the three months ended March 31, 2020 to conform to the current
period presentation.
Management believes Adjusted Gross Margin is an important measure of operating
performance and uses Adjusted Gross Margin per barrel to evaluate operating
performance and compare profitability to other companies in the industry and to
industry benchmarks. Management believes Adjusted Gross Margin 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, depletion, and
amortization.
Adjusted Gross Margin should not be considered an alternative to operating
income (loss), cash flows from operating activities, or any other measure of
financial performance or liquidity presented in accordance with GAAP. Adjusted
Gross Margin presented by other companies may not be comparable to our
presentation since each company may define this term differently as they may
include other manufacturing costs and depreciation expense in cost of revenues.
34
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The following tables present a reconciliation of Adjusted Gross Margin to the
most directly comparable GAAP financial measure, operating income (loss), on a
historical basis, for selected segments, for the periods indicated (in
thousands):
Three months ended March 31, 2021 Refining Logistics Retail
Operating income (loss) $ (90,865) $ 10,077 $ 49,355
Operating expense (excluding depreciation) 53,338 3,896 16,954
Depreciation, depletion, and amortization 14,064 5,254 2,660
Loss (gain) on sale of assets, net (21,259) - (43,653)
Inventory valuation adjustment 14,175 - -
LIFO liquidation adjustment 1,888 - -
RINs loss in excess of net obligation 28,770 - -
Unrealized gain on derivatives (4,012) - -
Adjusted Gross Margin (1) $ (3,901) $ 19,227 $ 25,316
Three months ended March 31, 2020 Refining Logistics Retail
Operating income (loss) $ (168,570) $ 18,776 $ (18,109)
Operating expense (excluding depreciation) 52,244 4,271 16,876
Depreciation, depletion, and amortization 12,994 4,667 2,799
Impairment expense 38,105 - 29,817
Inventory valuation adjustment 75,324 - -
RINs loss in excess of net obligation 6,602 - -
Unrealized loss on derivatives 22,876 - -
Adjusted Gross Margin (2) $ 39,575 $ 27,714 $ 31,383 ____________________________________________________________________________
(1)For the three months endedMarch 31, 2021 , there was no impairment expense. (2)For the three months endedMarch 31, 2020 , there was no LIFO liquidation adjustment or loss (gain) on sale of assets. Adjusted Net Income (Loss) and Adjusted EBITDA Adjusted Net Income (Loss) is defined as Net income (loss) excluding changes in the value of contingent consideration and common stock warrants, acquisition and integration costs, unrealized (gain) loss on derivatives, debt extinguishment and commitment costs, increase in (release of) tax valuation allowance and other deferred tax items, inventory valuation adjustment, severance costs, impairment expense, (gain) loss on sale of assets, Par's share of Laramie Energy's unrealized loss (gain) on derivatives, RINs loss (gain) in excess of net obligation, and impairment expense associated with our investment in Laramie Energy and our share of Laramie Energy's asset impairment losses in excess of our basis difference. Beginning in the second quarter of 2020, Adjusted Net Income (Loss) also includes the contango gains and backwardation losses associated with ourWashington inventory and intermediation obligation. Prior to 2020, contango gains and backwardation (losses) captured by ourWashington intermediation agreement were excluded from Adjusted Net Income (Loss) (as part of the inventory valuation adjustment). This change to our non-GAAP information was made to reflect the favorable or unfavorable impact of the market structure on the profitability of ourWashington refinery consistent with the presentation of such impacts on our other refineries. Also beginning in the third quarter of 2020, Adjusted Net Income (Loss) excludes the LIFO layer liquidation impacts associated with ourWashington inventory. We have recast the non-GAAP information for the three months endedMarch 31, 2020 to conform to the current period presentation. Adjusted EBITDA is Adjusted Net Income (Loss) excluding interest expense and financing costs, income taxes, DD&A, and equity losses (earnings) fromLaramie Energy, excluding Par's share of unrealized loss (gain) on derivatives, impairment of Par's investment, and our share of Laramie Energy's asset impairment losses in excess of our basis difference. We believe Adjusted Net Income (Loss) and Adjusted EBITDA 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 35 -------------------------------------------------------------------------------- •Our operating performance and return on invested capital as compared to other companies without regard to financing methods and capital structure. Adjusted Net Income (Loss) and Adjusted EBITDA should not be considered in isolation or as a substitute for operating income (loss), net income (loss), cash flows provided by operating, investing, and financing activities, or other income or cash flow statement data prepared in accordance with GAAP. Adjusted Net Income (Loss) and Adjusted EBITDA presented by other companies may not be comparable to our presentation as other companies may define these terms differently.
The following table presents a reconciliation of Adjusted Net Loss and Adjusted EBITDA to the most directly comparable GAAP financial measure, Net Loss, on a historical basis for the periods indicated (in thousands):
Three Months Ended March 31,
2021 2020
Net Income (Loss) $ (62,227) $ (222,337)
Inventory valuation adjustment 14,175 75,324
LIFO liquidation adjustment 1,888 -
RINs loss in excess of net obligation 28,770 6,602
Unrealized loss (gain) on derivatives (4,012) 22,876
Acquisition and integration costs 438 665
Debt extinguishment and commitment costs 1,507 -
Changes in valuation allowance and other deferred tax items (1)
- (18,373)
Change in value of common stock warrants - (4,270)
Severance costs 16 149
Gain on sale of assets, net (64,912) -
Impairment expense - 67,922
Impairment of Investment in Laramie Energy, LLC (2) - 45,294
Par's share of Laramie Energy's unrealized loss (gain) on derivatives (2)
- (1,110)
Adjusted Net Loss (3) (84,357) (27,258)
Depreciation, depletion, and amortization 22,880 21,283
Interest expense and financing costs, net 18,151 18,674
Equity losses (earnings) from
- 847
Income tax expense (benefit) - 126
Adjusted EBITDA $ (43,326) $ 13,672 ________________________________________
(1)Includes increases in (releases of) our valuation allowance associated with business combinations and changes in deferred tax assets and liabilities that are not offset by a change in the valuation allowance. These tax expenses (benefits) are included in Income tax benefit on our condensed consolidated statements of operations. (2)Included in Equity losses fromLaramie Energy, LLC on our condensed consolidated statements of operations. (3)For the three months endedMarch 31, 2021 and 2020, there was no change in value of contingent consideration. Factors Impacting Segment Results Three months endedMarch 31, 2021 compared to the three months endedMarch 31, 2020 Refining. Operating loss for our refining segment was$90.9 million for the three months endedMarch 31, 2021 , an increase of$77.7 million compared to operating loss of$168.6 million for the three months endedMarch 31, 2020 . The increase in profitability was primarily driven by a$193.0 million favorable change in lower of cost or net realizable value adjustments and favorable feedstock costs at ourHawaii refinery , partially offset by a 28% decrease in sales volume, a$72.0 million increase in RINs mark-to-market expense related to our gross RINs obligation, and unfavorable crack spreads primarily 36 -------------------------------------------------------------------------------- due to decreased demand as a result of the COVID-19 pandemic. Other factors impacting our results period over period include a$7.3 million favorable FIFO impact in 2021 compared to a$15.0 million unfavorable FIFO impact in the same period in 2020 at ourWyoming refinery , our 2020 goodwill impairment of$38.1 million , and a 2021 gain of$21.3 million primarily related to the sale-leaseback transactions we closed onFebruary 23, 2021 andMarch 12, 2021 . Logistics. Operating income for our logistics segment was$10.1 million for the three months endedMarch 31, 2021 , a decrease of$8.7 million compared to operating income of$18.8 million for the three months endedMarch 31, 2020 . The decrease is due to a net 28% and 12% lower throughput across ourHawaii andWashington logistics assets, respectively, primarily due to decreased demand as a result of the COVID-19 pandemic andWashington refinery turnaround activities. Retail. Operating income for our retail segment was$49.4 million for the three months endedMarch 31, 2021 , an increase of$67.5 million compared to operating loss of$18.1 million for the three months endedMarch 31, 2020 . The increase was primarily due to our 2020 goodwill impairment of$29.8 million with no corresponding impairment in 2021 and a gain of$43.7 million primarily related to the sale-leaseback transactions we closed onFebruary 23, 2021 andMarch 12, 2021 . Adjusted Gross Margin Three months endedMarch 31, 2021 compared to the three months endedMarch 31, 2020 Refining. For the three months endedMarch 31, 2021 , our refining Adjusted Gross Margin was a loss of$3.9 million , a decrease of$43.5 million compared to income of$39.6 million for the three months endedMarch 31, 2020 . The decrease was primarily driven by a 28% decline in refining sales volumes, unfavorable crack spreads inHawaii andWashington , and a$46.9 million RINs mark-to-market expense related to the 2019 and 2020 net obligations due to increasing RINs prices, partially offset by favorable feedstock costs. Adjusted Gross Margin for theHawaii refineries decreased from$0.24 per barrel during the three months endedMarch 31, 2020 to a loss of$0.46 per barrel during the three months endedMarch 31, 2021 primarily due to a 35% decrease in sales volume, a$26.1 million RINs mark-to-market expense, and unfavorable crack spreads, partially offset by favorable feedstock costs. Adjusted Gross margin for theWyoming refinery decreased$3.16 per barrel primarily due to a 21% decrease in sales volume and an$11.2 million RINs mark-to-market expense. Adjusted Gross Margin for theWashington refinery decreased$11.27 per barrel primarily due to declining crack spreads, a$9.6 million RINs mark-to-market expense, and a 10% decrease in sales volumes. Logistics. For the three months endedMarch 31, 2021 , our logistics Adjusted Gross Margin was$19.2 million , a decrease of$8.5 million compared to$27.7 million for the three months endedMarch 31, 2020 . The decrease is due to a net 28% and 12% lower throughput across ourHawaii andWashington logistics assets, respectively, primarily due to decreased demand as a result of the COVID-19 pandemic andWashington refinery turnaround activities. Retail. For the three months endedMarch 31, 2021 , our retail Adjusted Gross Margin was$25.3 million , a decrease of$6.1 million when compared to$31.4 million for the three months endedMarch 31, 2020 . The decrease was primarily due to a 15% decrease in fuel margins related to rising crude prices and a 13% decline in sales volumes. Discussion of Consolidated Results Three months endedMarch 31, 2021 compared to the three months endedMarch 31, 2020 Revenues. For the three months endedMarch 31, 2021 , revenues were$0.9 billion , a$0.3 billion decrease compared to$1.2 billion for the three months endedMarch 31, 2020 . The decrease was primarily due to a decrease of$0.3 billion in third-party refining segment revenue as a result of a 28% decrease in refining sales volumes and a decrease in average product cracks, partially offset by an increase in refined product prices related to higher crude oil prices. Brent crude oil prices improved to$61.32 per barrel during the first quarter of 2021 compared to$50.82 per barrel during the first quarter of 2020, and WTI crude oil prices improved to$58.14 per barrel during the first quarter of 2021 compared to$45.98 per barrel during the first quarter of 2020. Cost of Revenues (Excluding Depreciation). For the three months endedMarch 31, 2021 , cost of revenues (excluding depreciation) was$0.9 billion , a$0.3 billion decrease compared to$1.2 billion for the three months endedMarch 31, 2020 . The decrease was primarily driven by lower refining volumes as discussed above, a$193.0 million favorable change in in lower of cost or net realizable value adjustments, and a decrease in purchased products volumes, partially offset by increases to cost of revenues caused by higher Brent and WTI crude oil prices, and a$72.0 million increase in the RINs mark-to-market expense related to our gross RINs obligation. Other factors impacting our results period over period are lower purchased product, feedstock, and logistics costs and unfavorable derivative activity. 37 -------------------------------------------------------------------------------- Operating Expense (Excluding Depreciation). For the three months endedMarch 31, 2021 , operating expense (excluding depreciation) was$74.2 million , which was relatively consistent with$73.4 million for the three months endedMarch 31, 2020 . Depreciation, Depletion, and Amortization. For the three months endedMarch 31, 2021 , DD&A was$22.9 million , which was relatively consistent with$21.3 million for the three months endedMarch 31, 2020 . Impairment Expense. During the three months endedMarch 31, 2020 , we recorded goodwill impairment charges of$67.9 million related to our Refining and Retail segments as a result of the global economic impact of the COVID-19 pandemic and a steep decline in current and forecasted prices and demand for crude oil and refined products. No such charge was recorded in 2021. Gain on Sale of Assets. During the three months endedMarch 31, 2021 , we recorded a gain of$64.9 million primarily related to the Sale-Leaseback Transaction we closed onFebruary 23, 2021 andMarch 12, 2021 . No such gain or loss was recorded during the three months endedMarch 31, 2020 .
General and Administrative Expense (Excluding Depreciation). For the three
months ended
Interest Expense and Financing Costs, Net. For the three months endedMarch 31, 2021 , our interest expense and financing costs were$18.2 million , relatively consistent with$18.7 million for the three months endedMarch 31, 2020 . Change in Value of Common Stock Warrants. For the three months endedMarch 31, 2020 , the change in value of common stock warrants resulted in income of$4.3 million . During January andMarch 2020 , one of our stockholders and its affiliates exercised the remaining 354,350 common stock warrants in exchange for 350,542 shares of common stock. We estimated the fair value of our outstanding common stock warrants using the difference between the strike price of the warrant and the market price of our common stock. During the three months endedMarch 31, 2020 , our stock price decreased from$23.24 per share as ofDecember 31, 2019 to$7.10 per share as ofMarch 31, 2020 . During the three months endedMarch 31, 2021 , there were no common stock warrants outstanding. Equity Earnings fromLaramie Energy, LLC . For the three months endedMarch 31, 2021 , there were no equity earnings (losses) from Laramie Energy, compared to equity losses of$45.0 million for the three months endedMarch 31, 2020 . As ofJune 30, 2020 , we discontinued the application of the equity method of accounting for our investment in Laramie Energy because the book value of such investment has been reduced to zero. Please read Note 3-Investment inLaramie Energy, LLC for further information. Income Taxes. For the three months endedMarch 31, 2021 , we did not record any income taxes. For the three months endedMarch 31, 2020 , we recorded an income tax benefit of$18.2 million primarily driven by a$18.4 million benefit associated with a partial release of our valuation allowance in connection with indefinite-lived deferred tax assets from interest expense carryforwards with no expiration. 38 --------------------------------------------------------------------------------
Consolidating Condensed Financial Information
OnDecember 21, 2017 ,Par Petroleum, LLC (the "Issuer") issued its 7.75% Senior Secured Notes due 2025 in a private offering under Rule 144A and Regulation S of the Securities Act. OnJanuary 11, 2019 , the Issuers (defined below) entered into a term loan and guaranty agreement withGoldman Sachs Bank USA , as administrative agent, and the lenders party thereto with respect to a$250.0 million term loan (the "Term Loan B"). OnJune 5, 2020 , the Issuers issued their 12.875% Senior Secured Notes due 2026 in a private offering under Rule 144A and Regulation S of the Securities Act. The 7.75% Senior Secured Notes, the Term Loan B, and the 12.875% Senior Secured Notes were co-issued byPar Petroleum Finance Corp. (together with the Issuer, the "Issuers"), which has no independent assets or operations. The 7.75% Senior Secured Notes, Term Loan B, and 12.875% Senior Secured Notes are guaranteed on a senior unsecured basis only as to payment of principal and interest byPar Pacific Holdings, Inc. (the "Parent") and are guaranteed on a senior secured basis by all of the subsidiaries ofPar Petroleum, LLC . The following supplemental condensed consolidating financial information reflects (i) the Parent's separate accounts, (ii)Par Petroleum, LLC and its consolidated subsidiaries' accounts (which are all guarantors of the 7.75% Senior Secured Notes, Term Loan B, and 12.875% Senior Secured Notes), (iii) the accounts of subsidiaries of the Parent that are not guarantors of the 7.75% Senior Secured Notes, Term Loan B, or 12.875% Senior Secured Notes and consolidating adjustments and eliminations, and (iv) the Parent's consolidated accounts for the dates and periods indicated. For purposes of the following condensed consolidating information, the Parent's investment in its subsidiaries is accounted for under the equity method of accounting (dollar amounts in thousands). 39 -------------------------------------------------------------------------------- As of March 31, 2021 Non-Guarantor Par Pacific Parent Issuer and Subsidiaries and Holdings, Inc. Guarantor Subsidiaries Eliminations and Subsidiaries ASSETS Current assets Cash and cash equivalents$ 3,539 $ 209,921 $ 1,273$ 214,733 Restricted cash 330 1,670 - 2,000 Trade accounts receivable - 155,883 3 155,886 Inventories - 579,206 - 579,206 Prepaid and other current assets 13,123 11,296 494 24,913 Due from related parties 90,629 - (90,629) - Total current assets 107,621 957,976 (88,859) 976,738 Property, plant, and equipment Property, plant, and equipment 21,595 1,132,886 3,957 1,158,438 Less accumulated depreciation, depletion, and amortization (15,034) (251,446) (2,786) (269,266) Property, plant, and equipment, net 6,561 881,440 1,171 889,172 Long-term assets Operating lease right-of-use assets 3,567 424,010 - 427,577 Investment in subsidiaries 256,282 - (256,282) - Intangible assets, net - 18,227 - 18,227 Goodwill - 125,399 2,598 127,997 Other long-term assets 723 62,036 - 62,759 Total assets$ 374,754 $ 2,469,088 $ (341,372) $ 2,502,470 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current maturities of long-term debt$ 47,974 $ 10,842 $ -$ 58,816 Obligations under inventory financing agreements - 592,621 - 592,621 Accounts payable 1,553 133,536 1,478 136,567 Deferred revenue - 6,980 - 6,980 Accrued taxes 61 29,749 - 29,810 Operating lease liabilities 703 57,186 - 57,889 Other accrued liabilities 8,121 301,832 (1,962) 307,991 Due to related parties 35,615 20,514 (56,129) - Total current liabilities 94,027 1,153,260 (56,613) 1,190,674 Long-term liabilities Long-term debt, net of current maturities - 597,185 - 597,185 Finance lease liabilities 43 11,901 (4,594) 7,350 Operating lease liabilities 4,573 370,811 - 375,384 Other liabilities 44 66,032 (10,266) 55,810 Total liabilities 98,687 2,199,189 (71,473) 2,226,403 Commitments and contingencies Stockholders' equity Preferred stock - - - - Common stock 601 - - 601 Additional paid-in capital 814,467 449,694 (449,694) 814,467 Accumulated earnings (deficit) (539,255) (180,879) 180,879 (539,255) Accumulated other comprehensive income (loss) 254 1,084 (1,084) 254 Total stockholders' equity 276,067 269,899 (269,899) 276,067
Total liabilities and stockholders' equity
40
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As of December 31, 2020
Non-Guarantor Par Pacific
Parent Issuer and Subsidiaries and Holdings, Inc.
Guarantor Subsidiaries Eliminations and Subsidiaries
ASSETS
Current assets
Cash and cash equivalents $ 480 $ 67,147 $ 682 $ 68,309
Restricted cash 330 1,670 - 2,000
Trade accounts receivable - 111,654 3 111,657
Inventories - 429,855 - 429,855
Prepaid and other current assets 16,983 7,171 494 24,648
Due from related parties 107,995 - (107,995) -
Total current assets 125,788 617,497 (106,816) 636,469
Property, plant, and equipment
Property, plant, and equipment 21,477 1,124,587 37,814 1,183,878 Less accumulated depreciation, depletion, and amortization (14,368) (233,927) (2,818) (251,113) Property, plant, and equipment, net 7,109 890,660 34,996 932,765 Long-term assets Operating lease right-of-use assets 3,714 367,850 (14,398) 357,166 Investment in Laramie Energy, LLC - - - - Investment in subsidiaries 209,010 - (209,010) - Intangible assets, net - 18,892 - 18,892 Goodwill - 125,399 2,598 127,997 Other long-term assets 723 59,849 - 60,572 Total assets$ 346,344 $ 2,080,147 $ (292,630) $ 2,133,861 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current maturities of long-term debt$ 47,301 $ 11,048 $ 1,584$ 59,933 Obligations under inventory financing agreements - 423,686 - 423,686 Accounts payable 2,401 103,067 1,477 106,945 Deferred revenue - 4,083 - 4,083 Accrued taxes 49 27,371 20 27,440 Operating lease liabilities 750 60,449 (4,234) 56,965 Other accrued liabilities 10,907 190,031 (1,310) 199,628 Due to related parties 33,757 36,124 (69,881) - Total current liabilities 95,165 855,859 (72,344) 878,680 Long-term liabilities Long-term debt, net of current maturities - 608,353 40,307 648,660 Common stock warrants - - - - Finance lease liabilities 77 7,848 - 7,925 Operating lease liabilities 4,783
309,736 (10,164) 304,355 Other liabilities 45 87,382 (39,460) 47,967 Total liabilities 100,070 1,869,178 (81,661) 1,887,587 Commitments and contingencies Stockholders' equity Preferred stock - - - - Common stock 540 - - 540 Additional paid-in capital 726,504 307,967 (307,967) 726,504 Accumulated earnings (deficit) (477,028) (94,086) 94,086 (477,028) Accumulated other comprehensive income (loss) (3,742) (2,912) 2,912 (3,742) Total stockholders' equity 246,274 210,969 (210,969) 246,274
Total liabilities and stockholders' equity
41
--------------------------------------------------------------------------------
Three Months Ended
Non-Guarantor Par Pacific
Parent Issuer and Subsidiaries and Holdings, Inc. and
Guarantor Subsidiaries Eliminations Subsidiaries
Revenues $ - $ 888,680 $ - $ 888,680
Operating expenses
Cost of revenues (excluding depreciation) - 888,863 - 888,863
Operating expense (excluding depreciation) - 74,905 (717) 74,188
Depreciation, depletion, and amortization 666 22,119 95 22,880
Impairment expense - - - -
Gain on sale of assets, net - (11,208) (53,704) (64,912)
General and administrative expense
(excluding depreciation) 3,105 8,780 - 11,885
Acquisition and integration costs 438 - - 438
Total operating expenses 4,209 983,459 (54,326) 933,342
Operating income (loss) (4,209) (94,779) 54,326 (44,662)
Other income (expense)
Interest expense and financing costs, net (1,290) (16,897) 36 (18,151)
Debt extinguishment and commitment costs - (91) (1,416) (1,507)
Gain on curtailment of pension obligation - 2,032 - 2,032
Other income, net (7) 69 (1) 61
Equity earnings (losses) from subsidiaries (56,721) - 56,721 -
Total other income (expense), net (58,018) (14,887) 55,340 (17,565)
Income (loss) before income taxes (62,227) (109,666) 109,666 (62,227)
Income tax benefit (expense) (1) - 22,873 (22,873) -
Net income (loss) $ (62,227) $ (86,793) $ 86,793 $ (62,227)
Adjusted EBITDA $ (3,112) $ (40,930) $ 716 $ (43,326) ________________________________________________________
(1) The income tax benefit (expense) of the Parent Guarantor and Issuer and
Subsidiaries is determined using the separate return method. The Non-Guarantor
Subsidiaries and Eliminations column includes tax benefits recognized at the Par
consolidated level that are primarily associated with changes to the
consolidated valuation allowance and other deferred tax balances.
42
--------------------------------------------------------------------------------
Three Months Ended
Non-Guarantor Par Pacific
Parent Issuer and Subsidiaries and Holdings, Inc.
Guarantor Subsidiaries Eliminations and Subsidiaries
Revenues $ - $ 1,204,081 $ 2 $ 1,204,083
Operating expenses
Cost of revenues (excluding depreciation) - 1,210,211 - 1,210,211
Operating expense (excluding depreciation) - 74,574 (1,183) 73,391
Depreciation, depletion, and amortization 736 20,417 130 21,283
Impairment expense - 67,922 - 67,922
Gain on sale of assets, net - - - -
General and administrative expense
(excluding depreciation) 3,001 8,783 - 11,784
Acquisition and integration costs - 665 - 665
Total operating expenses 3,737 1,382,572 (1,053) 1,385,256
Operating loss (3,737) (178,491) 1,055 (181,173)
Other income (expense)
Interest expense and financing costs, net (1,228) (15,030) (2,416) (18,674)
Other income, net 10 14 - 24
Change in value of common stock warrants 4,270 - - 4,270
Equity earnings (losses) from subsidiaries (221,652) - 221,652 -
Equity losses from Laramie Energy, LLC - - (45,031) (45,031)
Total other income (expense), net (218,600) (15,016) 174,205 (59,411)
Income (loss) before income taxes (222,337) (193,507) 175,260 (240,584)
Income tax benefit (expense) (1) - 31,495 (13,248) 18,247
Net income (loss) $ (222,337) $ (162,012) $ 162,012 $ (222,337)
Adjusted EBITDA $ (2,930) $ 15,417 $ 1,185 $ 13,672 ________________________________________________________
(1) The income tax benefit (expense) of the Parent Guarantor and Issuer and
Subsidiaries is determined using the separate return method. The Non-Guarantor
Subsidiaries and Eliminations column includes tax benefits recognized at the Par
consolidated level that are primarily associated with changes to the
consolidated valuation allowance and other deferred tax balances.
43
--------------------------------------------------------------------------------Non-GAAP Financial Measures
Adjusted EBITDA for the supplemental consolidating condensed financial information, which is segregated at the "Parent Guarantor," "Issuer and Subsidiaries," and "Non-Guarantor Subsidiaries and Eliminations" levels, is calculated in the same manner as for thePar 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 Loss, on a historical basis for the periods indicated (in thousands):
Three Months Ended
Non-Guarantor Par Pacific
Parent Issuer and Subsidiaries and Holdings, Inc. and
Guarantor Subsidiaries Eliminations Subsidiaries
Net income (loss) $ (62,227) $ (86,793) $ 86,793 $ (62,227)
Inventory valuation adjustment - 14,175 - 14,175
LIFO liquidation adjustment - 1,888 - 1,888
RINs loss (gain) in excess of net obligation - 28,770 - 28,770
Unrealized loss (gain) on derivatives - (4,012) - (4,012)
Acquisition and integration costs 438 - - 438
Debt extinguishment and commitment costs - 91 1,416 1,507
Severance costs - 16 - 16
Gain on sale of assets, net - (11,208) (53,704) (64,912)
Depreciation, depletion, and amortization 666 22,119 95 22,880
Interest expense and financing costs, net 1,290 16,897 (36) 18,151
Equity losses (income) from subsidiaries 56,721 - (56,721) -
Income tax expense (benefit) - (22,873) 22,873 -
Adjusted EBITDA (3) $ (3,112) $ (40,930) $ 716 $ (43,326)
44
--------------------------------------------------------------------------------
Three Months Ended March 31, 2020
Non-Guarantor Par Pacific
Parent Issuer and Subsidiaries and Holdings, Inc. and
Guarantor Subsidiaries Eliminations Subsidiaries
Net income (loss) $ (222,337) $
(162,012) $ 162,012
- 75,324 - 75,324
RINs loss (gain) in excess of net obligation - 6,602 - 6,602
Unrealized loss on derivatives - 22,876 - 22,876
Acquisition and integration costs - 665 - 665
Changes in valuation allowance and other deferred
tax items (1) - - (18,373) (18,373)
Change in value of common stock warrants (4,270) - - (4,270)
Severance costs 61 88 - 149
Impairment of Investment in Laramie Energy, LLC
(2) - - 45,294 45,294
Par's share of Laramie Energy's unrealized gain
on derivatives (2) - - (1,110) (1,110)
Impairment expense - 67,922 - 67,922
Depreciation, depletion, and amortization 736 20,417 130 21,283
Interest expense and financing costs, net 1,228 15,030 2,416 18,674
Equity losses from Laramie Energy, LLC , excluding
Par's share of unrealized gain on derivatives and
impairment losses - - 847 847
Equity losses (income) from subsidiaries 221,652 - (221,652) -
Income tax expense (benefit) - (31,495) 31,621 126
Adjusted EBITDA (3) $ (2,930) $ 15,417 $ 1,185 $ 13,672
________________________________________________________
(1)Includes increases in (releases of) our valuation allowance associated with business combinations and changes in deferred tax assets and liabilities that are not offset by a change in the valuation allowance. These tax expenses (benefits) are included in Income tax expense (benefit) on our condensed consolidated statements of operations. (2)Includes impairment losses on our investment in Laramie Energy and our share of Laramie Energy's asset impairment losses in excess of our basis difference. These impairment losses and our share of Laramie Energy's unrealized loss (gain) on derivatives are included in Equity earnings (losses) fromLaramie Energy, LLC on our condensed consolidated statements of operations. (3)For the three months endedMarch 31, 2021 , there was no change in valuation allowance and other deferred tax items, change in value of common stock warrants, impairment of investment in Laramie Energy, unrealized gain on derivatives included in equity earnings from Laramie Energy, impairment expense, or equity losses from Laramie Energy. For the three months endedMarch 31, 2020 , there was no LIFO liquidation adjustment or loss (gain) on sale of assets. Liquidity and Capital Resources Our liquidity and capital requirements are primarily a function of our debt maturities and debt service requirements and contractual obligations, capital expenditures, turnaround outlays, and working capital needs. Examples of working capital needs include purchases and sales of commodities and associated margin and collateral requirements, facility maintenance costs, and other costs such as payroll. Our primary sources of liquidity are cash flows from operations, cash on hand, amounts available under our credit agreements, and access to capital markets. Our liquidity position as ofMarch 31, 2021 was$286.9 million and consisted of$282.1 million atPar Petroleum, LLC and subsidiaries,$3.5 million atPar Pacific Holdings , and$1.3 million at all our other subsidiaries. As ofMarch 31, 2021 , we had access to the J. Aron Deferred Payment Arrangement, the ABL Credit Facility, the MLC receivable advances, and cash on hand of$214.7 million . In addition, we have the Supply and Offtake Agreements withJ. Aron and the Washington Refinery Intermediation Agreement, which are used to finance the majority of the inventory at ourHawaii andWashington refineries, respectively. Generally, the primary uses of our capital resources have been in the operations of our refining and retail segments, payments related to acquisitions, and to repay or refinance indebtedness. 45 -------------------------------------------------------------------------------- In the first quarter of 2021, we closed on the sale and leaseback of twenty-two (22) of our retail properties inHawaii for an aggregate cash purchase price of approximately$112.8 million net of transaction fees (the "Sale-Leaseback Transaction"). 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. OnMarch 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$87.4 million , after deducting underwriting discounts and commissions and offering expenses. We intend to use the net proceeds from the Equity Offering for general corporate purposes, including repaying indebtedness, capital expenditures, and funding working capital. 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 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. We may from time to time seek to retire or repurchase our 5.00% Convertible Senior Notes, our 7.75% Senior Secured Notes, our 12.875% Senior Secured Notes, or 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. Cash Flows
The following table summarizes cash activities for the three months ended
Three
Months Ended
2021 2020
Net cash provided by (used in) operating activities
94,678 (14,943)
Net cash provided by (used in) financing activities 82,483 (63,491)
Net cash used in operating activities was approximately $30.7 million for the
three months ended March 31, 2021 , which resulted from a net loss of
approximately $62.2 million , offset by net cash provided by changes in operating
assets and liabilities of approximately $85.8 million and non-cash earnings from
operations of approximately $54.3 million . The change in our operating assets
and liabilities for the three months ended March 31, 2021 was primarily due to a
net increase in our Supply and Offtake Agreements and Washington Refinery
Intermediation Agreement obligations of $124.4 million and an increase in our
gross environmental credit obligations of $109.5 million , partially offset by
increases in inventories of $139.1 million and accounts receivable of $45.0
million . Net cash provided by changes in operating assets and liabilities also
includes an increase of $5.6 million in deferred turnaround costs. Net cash
provided by operating activities was approximately $14.5 million for the three
months ended March 31, 2020 , which resulted from a net loss of approximately
$222.3 million and net cash used for changes in operating assets and liabilities
of approximately $88.7 million , offset by non-cash charges to operations of
approximately $325.6 million .
For the three months ended March 31, 2021 , net cash provided by investing
activities was approximately $94.7 million and primarily related to proceeds
received from the Sale-Leaseback Transaction. Net cash used in investing
activities was approximately $14.9 million for the three months ended March 31,
2020 and primarily related to additions to property and equipment totaling
approximately $14.9 million .
Net cash provided by financing activities for the three months ended March 31,
2021 was approximately $82.5 million , which consisted primarily of proceeds of
$87.4 million from our March 2021 Equity Offering and net borrowings associated
with the J. Aron deferred payment and MLC receivable advances of approximately
$44.5 million , partially offset by net debt and insurance premium repayments of
approximately $47.3 million . Net cash used in financing activities for the three
months ended March 31, 2020 was approximately $63.5 million , which consisted
primarily of net debt and insurance premium repayments of approximately $9.8
million and net repayments associated with the J. Aron deferred payment and MLC
receivable advances of approximately $52.1 million .
46
--------------------------------------------------------------------------------Capital Expenditures and Turnaround Costs
Our deferred turnaround costs and capital expenditures, excluding acquisitions, for the three months endedMarch 31, 2021 totaled approximately$13.8 million and were primarily related to the 2021 turnaround and related scheduled maintenance work at ourWashington refinery and underground tank replacements, rebranding, and point of sale and other equipment upgrades at our Retail segment. Our capital expenditure and deferred turnaround cost budget for 2021 ranges from$35 to$45 million and primarily relates to a partial turnaround at ourWashington refinery and scheduled sustaining maintenance, regulatory, and safety compliance projects across all businesses.
We also continue to seek strategic investments in business opportunities, but the amount and timing of those investments are not predictable. Commitments and Contingencies
Supply and Offtake Agreements. OnJune 1, 2015 , we entered into the Supply and Offtake Agreements withJ. Aron to support ourHawaii refining operations. OnMay 8, 2017 , we andJ. Aron amended the Supply and Offtake Agreements and extended the term throughMay 31, 2021 with a one-year extension option upon mutual agreement of the parties. OnJune 27, 2018 , we andJ. Aron amended the Supply and Offtake Agreements to increase the amount that we may defer under the deferred payment arrangement. OnDecember 5, 2018 , we andJ. Aron amended the Supply and Offtake Agreements to account for additional processing capacity expected to be provided by thePar West Hawaii refinery . OnMay 4, 2021 , we extended the term of the Supply and Offtake Agreements toJune 30, 2021 . We expect to finalize a new multi-year agreement during the second quarter. Please read Note 7-Inventory Financing Agreements for more information. Washington Refinery Intermediation Agreement. In connection with the consummation of the Washington Acquisition onJanuary 11, 2019 , we assumed the Washington Refinery Intermediation Agreement with MLC to support the operations of ourWashington refinery . OnNovember 1, 2019 , we and MLC amended the Washington Refinery Intermediation Agreement and extended the term throughJune 30, 2021 , We further amended the Washington Refinery Intermediation Agreement onFebruary 11, 2021 and extended the term throughMarch 31, 2022 . Please read Note 7-Inventory Financing Agreements for more information. From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of our business. Please read Note 13-Commitments and Contingencies to our condensed consolidated financial statements for more information. Critical Accounting Policies and Estimates There have been no material changes to critical accounting policies disclosed in our Annual Report on Form 10-K. Forward-Looking Statements Certain statements in this Quarterly Report on Form 10-Q may constitute "forward-looking" statements as defined in Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Private Securities Litigation Reform Act of 1995 ("PSLRA"), or in releases made by theSEC , all as may be amended from time to time. Such forward-looking statements involve known and unknown risks, uncertainties, and other important factors including, without limitation, our expectations regarding the impact of COVID-19 on our business, our customers, and the markets where we operate; our beliefs with regard to available capital resources, our beliefs regarding the likelihood or impact of any potential fines or penalties and of the fair value of certain assets, and our expectations with respect to laws and regulations, including environmental regulations and related compliance costs and any fines or penalties related thereto; our expectations regarding the sufficiency of our cash flows and liquidity; our expectations regarding anticipated capital expenditures, including the timing and cost of compliance with consent decrees and other enforcement actions; our expectations regarding the impact of the adoption of certain accounting standards; our estimates regarding the fair value of certain indebtedness; estimated costs to settle claims from the Delta bankruptcy; the estimated value of, and our ability to settle, legal claims remaining to be settled against third parties; our expectations regarding the synergies or other benefits of our acquisitions; our expectations regarding certain tax liabilities and debt obligations; our expectations and estimates regarding our Supply and Offtake Agreements and the Washington Refinery Intermediation Agreement; management's assumptions about future events; our ability to raise additional debt or equity capital; our ability to make strategic investments in business opportunities; and the estimates, assumptions, and projections regarding future financial condition, results of operations, liquidity, and cash flows. These and other forward-looking statements could cause the actual results, performance, or achievements of Par and its subsidiaries to differ materially from any future results, performance, or achievements expressed or implied by such forward-looking statements. Statements that are not historical fact are forward- 47
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looking statements. Forward-looking statements can be identified by, among other things, the use of forward-looking language, such as the words "plan," "believe," "expect," "anticipate," "intend," "estimate," "project," "may," "will," "would," "could," "should," "seeks," or "scheduled to," or other similar words, or the negative of these terms or other variations of these terms or comparable language, or by discussion of strategy or intentions. These cautionary statements are being made pursuant to the Securities Act, the Exchange Act, and the PSLRA with the intention of obtaining the benefits of the "safe harbor" provisions of such laws. The forward-looking statements contained in this Quarterly Report on Form 10-Q are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control, including those set out in our most recent Annual Report on Form 10-K and this Quarterly Report on Form 10-Q under "Risk Factors." In addition, management's assumptions about future events may prove to be inaccurate. All readers are cautioned that the forward-looking statements contained in this Quarterly Report on Form 10-Q are not guarantees of future performance; and we cannot assure any reader that such statements will be realized or that the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to factors described above and under Critical Accounting Policies and Risk Factors included in our most recent Annual Report on Form 10-K and in this Quarterly Report on Form 10-Q. All forward-looking statements speak only as of the date they are made. Additionally, significant uncertainties remain with respect to COVID-19 and its economic effects. Due to the unpredictable and unprecedented nature of the COVID-19 pandemic, we cannot identify all potential risks to, and impacts on, our business, including the ultimate adverse economic impact to the Company's business, results of operations, financial condition, and liquidity. However, the adverse impact of COVID-19 on the Company has been and will likely continue to be material. There can be no guarantee that the operational and financial measures the Company has taken, and may take in the future, will be fully effective. We do not intend to update or revise any forward-looking statements as a result of new information, future events, or otherwise. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.
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