Par Pacific Holdings Reports Third Quarter 2018 Results

Source Press Release
Company Par Pacific Holdings, Inc. 
Tags Capital Spending, Guidance, Financial & Operating Data, Strategy - Corporate
Date November 06, 2018

HOUSTON, Nov. 6, 2018 /PRNewswire/ -- Par Pacific Holdings, Inc.(NYSE: PARR) ("Par Pacific" or the"Company")today reported its financial results for the quarter ended September 30, 2018.

Third Quarter 2018 Highlights

  • Net Loss of $5.8 million, or $(0.13) per diluted share
  • Adjusted Net Income of $5.5 million, or $0.12 per diluted share
  • Adjusted EBITDA of $27.1 million
  • Record on-island sales of 75,300 barrels per day in Hawaii
  • Approved $44 million investment in Hawaii to increase on-island gasoline production; projected to come online in the first quarter of 2021
  • Laramie ownership interest increased to 46% from 39% in October following the redemption of a unitholder's interest

Par Pacific reported a net loss of $5.8 million, or $(0.13) per diluted share, for the quarter ended September 30, 2018, compared to net income of $18.8 million, or $0.41 per diluted share, for the same quarter in 2017. Third quarter 2018 Adjusted Net Income was $5.5 million, compared to Adjusted Net Income of $25.2 million in the third quarter of 2017. Third quarter 2018 Adjusted EBITDA was $27.1 million, compared to Adjusted EBITDA of $45.1 million in the third quarter of 2017.  A reconciliation of reported non-GAAP financial measures to their most directly comparable GAAP financial measures can be found in the tables accompanying this news release.

"I am pleased with the progress we made during the quarter in executing on our strategic initiatives," said William Pate, Par Pacific's President and Chief Executive Officer. "We've announced a combined $116 million investment in Hawaii between the IES transaction and other expansion projects with attractive return profiles in order to capitalize on IMO 2020 and growing jet fuel demand. Our third quarter operating and financial results benefited from strong operations from our Wyoming Refinery and Retail, which mitigated challenges faced by our Hawaii Refinery."

Refining

The Refining segment reported operating income of $0.4 million in the third quarter of 2018, compared to operating income of $21.3 million in the third quarter of 2017. Adjusted Gross Margin for the Refining segment was $52.3 million in the third quarter of 2018, compared to $71.2 million in the third quarter of 2017.

Refining Adjusted EBITDA was $15.6 million in the third quarter of 2018, compared to Refining Adjusted EBITDA of $35.1 million in the third quarter of 2017. Over half of this decline can be attributed to market conditions in Hawaii.

Hawaii Refinery

The combined Mid Pacific Index was $8.59/bbl in the third quarter of 2018, compared to $10.27/bbl in the third quarter of 2017. The Hawaii refinery's throughput in the third quarter of 2018 was 72 thousand barrels per day (Mbpd). This compares to throughput of 74 Mbpd for the same quarter in 2017. Production costs were $3.97 per throughput barrel in the third quarter of 2018, compared to $3.69 per throughput barrel in the same period in 2017. The planned reformer regeneration and prolonged shut-down of downstream processing units related to Hurricane Lane impacted financial results in the third quarter of 2018.

Par Pacific is commencing a new $44 million capital project to build a 10 Mbpd naphtha hydrotreater and 6.5 Mbpd isomerization unit at its Hawaii refinery.  These units are expected to convert lower-value exported products into higher-value on-island gasoline sales, enhance octane production, and improve benzene and sulfur balances.  Startup is expected to occur in the first quarter of 2021.

Wyoming Refinery

During the third quarter of 2018, the Wyoming 3-2-1 Index averaged $26.25/bbl, compared to $25.29/bbl in the third quarter of 2017. The Wyoming refinery's throughput was 17 Mbpd in the third quarter of both 2018 and 2017. Production costs were $6.10 per throughput barrel in the third quarter of 2018, compared to $6.67 per throughput barrel in the same period in 2017.

Retail

The Retail segment reported operating income of $10.7 million in the third quarter of 2018, compared to $7.5 million in the third quarter of 2017. Adjusted Gross Margin for the Retail segment was $29.0 million in the third quarter of 2018, compared to $20.5 million in the same quarter of 2017.

Retail Adjusted EBITDA was $12.5 million in the third quarter of 2018, compared to $8.9 million in the third quarter of 2017. The Retail segment reported sales volumes of 32.2 million gallons in the third quarter of 2018, compared to 24.1 million gallons in the same quarter of 2017. The third quarter of 2018 includes results from the Northwest retail acquisition.

Logistics

The Logistics segment reported operating income of $9.0 million in the third quarter of 2018, compared to $10.4 million in the third quarter of 2017. Adjusted Gross Margin for the Logistics segment was $12.3 million in the third quarter of 2018, compared to $16.0 million in the same quarter of 2017.

Logistics Adjusted EBITDA was $10.6 million in the third quarter of 2018, compared to $12.0 million in the third quarter of 2017.

Laramie Energy

Equity earnings from Laramie in the third quarter of 2018 were $1.1 million, compared to equity earnings of $0.6 million in the third quarter of 2017. Third quarter 2018 earnings attributable to Par Pacific's 39.1% ownership interest in Laramie included $1.3 million in unrealized losses on derivative instruments compared to $1.0 million in unrealized gains on derivative instruments during the third quarter of 2017. Laramie's total net loss was $0.2 million in the third quarter of 2018, compared to a net loss of $1.8 million in the third quarter of 2017. Laramie's total Adjusted EBITDAX was $29.2 million in the third quarter of 2018, compared to $14.4 million in the third quarter of 2017.

Laramie averaged 211 million cubic feet equivalent per day (MMcfed) of production during the third quarter of 2018 and exited the quarter with production of 215 MMcfed. Subsequent to the third quarter of 2018, Par Pacific's ownership interest in Laramie increased to 46% following the redemption of a unitholder's interest.

Liquidity

Net cash provided by operations totaled $51.9 million for the nine months ended September 30, 2018, compared to $105.5 million during the nine months ended September 30, 2017. At September 30, 2018, Par Pacific's cash balance totaled $87.7 million, long-term debt totaled $389.6 million, and total liquidity was $184.9 million. Par Pacific's cash balance improved by $5.0 million in the quarter, primarily due to cash provided from operations.

Conference Call Information

A conference call is scheduled for Wednesday, November 7, 2018 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time). To access the call, please dial 1-877-404-9648 inside the U.S. or 1-412-902-0030 outside the U.S. and ask for the Par Pacific call. Please dial in at least 10 minutes early to register. The webcast may be accessed online through the Company's website at http://www.parpacific.com on the Investor Relations page. A telephone replay will be available until November 14, 2018 and may be accessed by calling 1-877-660-6853 inside the U.S. or 1-201-612-7415 outside the U.S. and using the conference ID 13684344#.

About Par Pacific

Par Pacific Holdings, Inc. (NYSE: PARR), headquartered in Houston, Texas, owns and operates market-leading energy and infrastructure businesses.  Par Pacific's strategy is to acquire and develop energy and infrastructure businesses in logistically complex markets.  Par Pacific owns and operates one of the largest energy networks in Hawaii with a 94,000-bpd refinery, a logistics system supplying the major islands of the state and 91 retail locations.  In the Pacific Northwest and the Rockies, Par Pacific owns and operates an 18,000-bpd refinery, a logistics system and 33 retail locations.  Par Pacific also owns 46% of  Laramie Energy, LLC, a natural gas production company with operations and assets concentrated in Western Colorado. More information is available at www.parpacific.com.

Forward-Looking Statements

This news release (and oral statements regarding the subject matter of this news release, including those made on the conference call and webcast announced herein) includes certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to qualify for the "safe harbor" from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements include, without limitation, statements about: expected market conditions; expected refinery throughput; anticipated capital expenditures, including major maintenance costs, and their effect on our financial and operating results, including earnings per share; anticipated retail sales volumes and on-island sales; the anticipated financial and operational results of Laramie Energy, LLC; the amount of our discounted net cash flows and the impact of our NOL carryforwards on them; our ability to identify, acquire and operate energy, related retailing and infrastructure companies with attractive competitive positions; the timing and expected results of certain development projects, including Par Pacific's investment in an isomerization unit and diesel hydrotreater, as well as the impact of such investments on Par Pacific's product mix and on-island sales; the timing of the IES transaction and anticipated synergies and other benefits of the IES transaction; the anticipated financial and operating results of the assets acquired in the IES transaction and their effect on Par Pacific's cash flows and profitability (including free cash flow and Adjusted earnings per share); and other risks and uncertainties detailed in Par Pacific's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and any other documents that Par Pacific files with the Securities and Exchange Commission (SEC). Additionally, forward looking statements are subject to certain risks, trends, and uncertainties, such as changes to financial condition and liquidity; the volatility of crude oil and refined product prices; operating disruptions at our refineries resulting from unplanned maintenance events or natural disasters; uncertainties inherent in estimating oil, natural gas and NGL reserves; environmental risks; and risks of political or regulatory changes. Par Pacific cannot provide assurances that the assumptions upon which these forward-looking statements are based will prove to have been correct. Should one of these risks materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expressed or implied in any forward-looking statements, and investors are cautioned not to place undue reliance on these forward-looking statements, which are current only as of this date. Par Pacific does not intend to update or revise any forward-looking statements made herein or any other forward-looking statements as a result of new information, future events or otherwise. The Company further expressly disclaims any written or oral statements made by a third party regarding the subject matter of this news release.

Contact:
Suneel Mandava
SVP, Finance
(713) 969-2136
smandava@parpacific.com

Condensed Consolidated Statements of Operations (Unaudited) (in thousands, except per share data) 
 
  Three Months Ended
September 30,
 
  Nine Months Ended
September 30,
 
  2018    2017    2018    2017 
Revenues  909,781      610,506      2,531,616      1,780,004   
Operating expenses               
Cost of revenues (excluding depreciation)  822,785      509,476      2,232,608      1,485,118   
Operating expense (excluding depreciation)  54,905      51,718      158,975      153,741   
Depreciation, depletion, and amortization  13,192      11,304      39,004      33,848   
General and administrative expense (excluding depreciation)  11,871      11,292      35,981      34,688   
Acquisition and integration expense  2,134          3,515      253   
Total operating expenses  904,887      583,790      2,470,083      1,707,648   
Operating income  4,894      26,716      61,533      72,356   
Other income (expense)               
Interest expense and financing costs, net  (10,425)      (7,419)      (29,346)      (25,500)   
Loss on termination of financing agreements              (1,804)   
Other income, net  85      649      861      886   
Change in value of common stock warrants  (1,067)      (975)      (396)      (2,211)   
Change in value of contingent consideration          (10,500)       
Equity earnings from Laramie Energy, LLC  1,050      553      4,274      11,651   
Total other income (expense), net  (10,357)      (7,192)      (35,107)      (16,978)   
Income (loss) before income taxes  (5,463)      19,524      26,426      55,378   
Income tax expense  (359)      (700)      (885)      (1,762)   
Net income (loss)  (5,822)      18,824      25,541      53,616   
               
Weighted-average shares outstanding               
Basic  45,709      45,561      45,676      45,505   
Diluted  45,709      51,992      45,721      45,527   
               
Income (loss) per share               
Basic  (0.13)      0.41      0.55      1.16   
Diluted  (0.13)      0.41      0.55      1.16   

Balance Sheet Data (Unaudited) (in thousands) 
 
  September 30, 2018    December 31, 2017 
Balance Sheet Data       
Cash and cash equivalents  87,734      118,333   
Working capital (1)  14,002      14,259   
Debt, including current portion  389,598      384,812   
Total stockholders' equity  477,406      447,719   

________________________________________

(1)  Working capital is calculated as (i) total current assets, excluding cash and cash equivalents less (ii) total current liabilities, excluding current portion of long-term debt. 

Operating Statistics 
 
The following table summarizes certain operational data: 
 
  Three Months Ended
September 30,
 
  Nine Months Ended
September 30,
 
  2018    2017    2018    2017 
Total Refining Segment               
Feedstocks Throughput (Mbpd)  88.6      90.3      90.8      90.1   
Refined product sales volume (Mbpd)  99.9      91.8      99.2      91.2   
               
Hawaii Refinery               
Feedstocks Throughput (Mbpd)  71.5      73.8      73.8      74.4   
Source of Crude Oil:               
North America  15.3    14.8    29.6    24.4 
Asia  38.1    23.6    23.0    24.3 
Africa  31.8    29.1    32.7    23.1 
Latin America        0.1 
Middle East  14.8    32.5    14.7    28.1 
Total  100.0    100.0    100.0    100.0 
               
Yield (% of total throughput)               
Gasoline and gasoline blendstocks  26.0    28.8    27.4    27.9 
Distillate  49.9    47.2    48.6    47.1 
Fuel oils  16.0    15.6    16.3    16.1 
Other products  4.8    5.1    4.5    5.7 
Total yield  96.7    96.7    96.8    96.8 
               
Refined product sales volume (Mbpd)               
On-island sales volume  75.3      63.7      72.2      62.1   
Exports sale volume  8.3      11.2      9.9      12.7   
Total refined product sales volume  83.6      74.9      82.1      74.8   
               
4-1-2-1 Singapore Crack Spread ($ per barrel) (1)  7.81      8.20      6.87      7.30   
4-1-2-1 Mid Pacific Crack Spread ($ per barrel) (1)  8.93      9.94      8.01      8.67   
Mid Pacific Crude Oil Differential ($ per barrel) (2)  0.34      (0.33)      (0.03)      (0.71)   
Operating income (loss) per bbl ($/throughput bbl)  (2.16)      0.91      0.94      2.05   
Adjusted Gross Margin per bbl ($/throughput bbl) (3)  3.66      6.32      4.74      6.39   
Production costs per bbl ($/throughput bbl) (4)  3.97      3.69      3.72      3.66   
DD&A per bbl ($/throughput bbl)  0.66      0.63      0.68      0.64   
               
Wyoming Refinery               
Feedstocks Throughput (Mbpd)  17.1      16.5      17.0      15.7   
               
Yield (% of total throughput)               
Gasoline and gasoline blendstocks  47.7    50.5    48.2    51.2 
Distillate  46.0    43.4    46.3    43.1 
Fuel oils  2.1    2.7    1.8    2.6 
Other products  1.7    1.6    1.3    1.6 
Total yield  97.5    98.2    97.6    98.5 
               
Refined product sales volume (Mbpd)  16.3      16.9      17.1      16.4   
               
  Three Months Ended
September 30,
 
  Nine Months Ended
September 30,
 
  2018    2017    2018    2017 
Wyoming Refinery (continued)               
Wyoming 3-2-1 Index ($ per barrel) (5)  26.25      25.29      22.34      21.11   
Operating income (loss) per bbl ($/throughput bbl)  9.32      9.97      7.45      4.82   
Adjusted Gross Margin per bbl ($/throughput bbl) (3)  17.95      18.67      16.35      14.03   
Production costs per bbl ($/throughput bbl) (4)  6.10      6.67      6.63      7.07   
DD&A per bbl ($/throughput bbl)  2.54      2.03      2.28      2.13   
               
Retail Segment               
Retail sales volumes (thousands of gallons) (6)  32,217      24,064      85,896      69,868   
               
Logistics Segment               
Pipeline throughput (Mbpd)               
Crude oil pipelines  88.0      82.3      88.3      86.5   
Refined product pipelines  82.9      85.0      84.4      86.7   
Total pipeline throughput  170.9      167.3      172.7      173.2   

________________________________________

(1)  The profitability of our Hawaii business is heavily influenced by crack spreads in both the Singapore and U.S. West Coast markets. These markets reflect the closest liquid market alternatives to source refined products for Hawaii. We believe the Singapore and Mid Pacific crack spreads (or four barrels of Brent crude converted into one barrel of gasoline, two barrels of distillate (diesel and jet fuel) and one barrel of fuel oil) best reflect a market indicator for our Hawaii refinery operations. The Mid Pacific crack spread is calculated using a ratio of 80% Singapore and 20% San Francisco indices. 
(2)  Weighted-average differentials, excluding shipping costs, of a blend of crudes with an API of 31.98 and sulfur weight percentage of 0.65% that is indicative of our typical crude oil mix quality compared to Brent crude. 
(3)  Please see discussion of Adjusted Gross Margin below. We calculate Adjusted Gross Margin per barrel by dividing Adjusted Gross Margin by total refining throughput.  
(4)  Management uses production costs per barrel to evaluate performance and compare efficiency to other companies in the industry. There are several 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. 
(5)  The profitability of our Wyoming refinery is heavily influenced by crack spreads in nearby markets. We believe the Wyoming 3-2-1 Index is the best market indicator for our operations in Wyoming. The Wyoming 3-2-1 Index is computed by taking two parts gasoline and one part distillate (ultra-low sulfur diesel) as created from three barrels of West Texas Intermediate Crude. Pricing is based 50% on applicable product pricing in Rapid City, South Dakota, and 50% on applicable product pricing in Denver, Colorado. 
(6)  Retail sales volumes for the three and nine months ended September 30, 2018, include the 92 days and 192 days of retail sales volumes from Northwest Retail from the acquisition date of March 23, 2018 through September 30, 2018, respectively. 

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), depreciation, depletion, and amortization ("DD&A"), 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 obligation, and purchase price allocation adjustments), and unrealized losses (gains) on derivatives or (ii) revenues less cost of revenues (excluding depreciation) plus inventory valuation adjustments and unrealized losses (gains) on derivatives. 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 Renewable Identification Numbers ("RINs") obligations, and certain hydrocarbon fees and taxes. Cost of revenues (excluding depreciation) also includes the unrealized gains (losses) on derivatives and inventory valuation adjustments that we exclude from Adjusted Gross Margin.

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 agreement and lower of cost or 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), net 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.

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 September 30, 2018  Refining    Logistics    Retail 
Operating income (loss)  438      8,959      10,650   
Operating expense (excluding depreciation)  36,766      1,663      16,476   
Depreciation, depletion, and amortization  8,336      1,654      1,876   
Inventory valuation adjustment  3,944           
Unrealized loss (gain) on derivatives  2,858           
Adjusted Gross Margin  52,342      12,276      29,002   
 
Three months ended September 30, 2017  Refining    Logistics    Retail 
Operating income (loss)  21,331      10,350      7,473   
Operating expense (excluding depreciation)  36,126      4,029      11,563   
Depreciation, depletion, and amortization  7,390      1,602      1,471   
Inventory valuation adjustment  9,423           
Unrealized loss (gain) on derivatives  (3,033)           
Adjusted Gross Margin  71,237      15,981      20,507   
 
Nine Months Ended September 30, 2018  Refining    Logistics    Retail 
Operating income (loss)  53,593      26,402      24,245   
Operating expense (excluding depreciation)  108,862      5,870      44,239   
Depreciation, depletion, and amortization  24,173      4,969      6,441   
Inventory valuation adjustment  (20,034)           
Unrealized loss (gain) on derivatives  4,849           
Adjusted Gross Margin  171,443      37,241      74,925   
 
Nine Months Ended September 30, 2017  Refining    Logistics    Retail 
Operating income (loss)  62,389      27,186      20,589   
Operating expense (excluding depreciation)  107,237      12,675      33,829   
Depreciation, depletion, and amortization  22,243      4,613      4,377   
Inventory valuation adjustment  (1,989)           
Unrealized loss (gain) on derivatives  79           
Adjusted Gross Margin  189,959      44,474      58,795   

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 expense, unrealized (gains) losses on derivatives, loss on termination of financing agreements, release of tax valuation allowance, inventory valuation adjustment, severance costs, impairment expense, and (gain) loss on sale of assets. Beginning in 2018, Adjusted Net Income (Loss) also excludes Par's share of Laramie Energy's unrealized loss (gain) on derivatives. The exclusion of Par's share of Laramie Energy's unrealized loss (gain) on derivatives from Adjusted Net Income (Loss) is consistent with our treatment of Par's unrealized (gains) losses on derivatives, which are also excluded from Adjusted Net Income (Loss). We have recast the non-GAAP information for three and nine months ended September 30, 2017 to conform to the current period presentation.

Adjusted EBITDA is Adjusted Net Income (Loss) excluding interest expense and financing costs, taxes, DD&A, and equity losses (earnings) from Laramie Energy (excluding Par's share of Laramie's unrealized loss or gain on derivatives). 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
  • 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 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):    

  Three Months Ended
September 30,
 
  Nine Months Ended
September 30,
 
  2018    2017    2018    2017 
Net income (loss)  (5,822)      18,824      25,541      53,616   
Inventory valuation adjustment  3,944      9,423      (20,034)      (1,989)   
Unrealized loss (gain) on derivatives  2,858      (3,033)      4,849      79   
Acquisition and integration expense  2,134          3,515      253   
Loss on termination of financing agreements              1,804   
Change in value of common stock warrants  1,067      975      396      2,211   
Change in value of contingent consideration          10,500       
Severance costs              1,595   
Par's share of Laramie Energy's unrealized loss (gain) on derivatives (1)  1,271      (997)      2,440      (14,914)   
Adjusted Net Income (2)  5,452      25,192      27,207      42,655   
Depreciation, depletion, and amortization  13,192      11,304      39,004      33,848   
Interest expense and financing costs, net  10,425      7,419      29,346      25,500   
Equity losses (earnings) from Laramie Energy, LLC, excluding Par's share of unrealized loss (gain) on derivatives  (2,321)      444      (6,714)      3,263   
Income tax expense  359      700      885      1,762   
Adjusted EBITDA  27,107      45,059      89,728      107,028   

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(1)  Included in Equity earnings from Laramie Energy, LLC on our Condensed Consolidated Statements of Operations. 
(2)  For the three and nine months ended September 30, 2018 and 2017, there was no tax valuation allowance release, impairment expense, or (gain) loss on sale of assets. 

The following table sets forth the computation of basic and diluted Adjusted Net Income (Loss) per share (in thousands, except per share amounts):

  Three Months Ended
September 30,
 
  Nine Months Ended
September 30,
 
  2018    2017    2018    2017 
Adjusted Net Income  5,452      25,192      27,207      42,655   
Undistributed Adjusted Net Income allocated to participating securities (1)  78      319      384      507   
Adjusted Net Income attributable to common stockholders  5,374      24,873      26,823      42,148   
Plus: effect of convertible securities      2,566           
Numerator for diluted income per common share  5,374      27,439      26,823      42,148   
               
Basic weighted-average common stock shares outstanding  45,709      45,561      45,676      45,505   
Add dilutive effects of common stock equivalents  54      6,431      45      22   
Diluted weighted-average common stock shares outstanding  45,763      51,992      45,721      45,527   
               
Basic Adjusted Net Income per common share  0.12      0.55      0.59      0.93   
Diluted Adjusted Net Income per common share  0.12      0.53      0.59      0.93   

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(1)  Participating securities include restricted stock that has been issued but has not yet vested. 

Adjusted EBITDA by Segment

Adjusted EBITDA by segment is defined as Operating income (loss) by segment excluding unrealized (gains) losses on derivatives, inventory valuation adjustment, severance costs, and depreciation, depletion, and amortization expense. We believe Adjusted EBITDA by segment is a useful supplemental financial measure to evaluate the economic performance of our segments without regard to financing methods, capital structure, or historical cost basis.

The following table presents a reconciliation of Adjusted EBITDA 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 September 30, 2018 
  Refining    Logistics    Retail 
Operating income by segment  438      8,959      10,650   
Depreciation, depletion, and amortization  8,336      1,654      1,876   
Inventory valuation adjustment  3,944           
Unrealized loss (gain) on derivatives  2,858           
Adjusted EBITDA  15,576      10,613      12,526   
 
  Three Months Ended September 30, 2017 
  Refining    Logistics    Retail 
Operating income by segment  21,331      10,350      7,473   
Depreciation, depletion, and amortization  7,390      1,602      1,471   
Inventory valuation adjustment  9,423           
Unrealized loss (gain) on derivatives  (3,033)           
Adjusted EBITDA  35,111      11,952      8,944   
   
  Nine Months Ended September 30, 2018 
  Refining    Logistics    Retail 
Operating income (loss) by segment  53,593      26,402      24,245   
Depreciation, depletion and amortization  24,173      4,969      6,441   
Inventory valuation adjustment  (20,034)           
Unrealized loss (gain) on derivatives  4,849           
Adjusted EBITDA  62,581      31,371      30,686   
 
  Nine Months Ended September 30, 2017 
  Refining    Logistics    Retail 
Operating income (loss) by segment  62,389      27,186      20,589   
Depreciation, depletion and amortization  22,243      4,613      4,377   
Inventory valuation adjustment  (1,989)           
Unrealized loss (gain) on derivatives  79           
Severance costs  395           
Adjusted EBITDA  83,117      31,799      24,966   

Laramie Energy Adjusted EBITDAX

Adjusted EBITDAX is defined as net income (loss) excluding commodity derivative loss (gain), losses on settled derivative instruments, interest expense, non-cash preferred dividends, depreciation, depletion, amortization, and accretion, exploration and geological and geographical expense, bonus accrual, equity-based compensation expense, loss (gain) on disposal of assets, pipeline (payment) deficiency accrual, and expired acreage (non-cash). We believe Adjusted EBITDAX is a useful supplemental financial measure to evaluate the economic and operational performance of exploration and production companies such as Laramie Energy.

The following table presents a reconciliation of Laramie Energy's Adjusted EBITDAX to the most directly comparable GAAP financial measure, net income (loss) for the periods indicated (in thousands):

  Three Months Ended
September 30,
 
  2018    2017 
Net loss  (151)      (1,838)   
Commodity derivative loss (gain)  3,132      (945)   
Losses on settled derivative instruments  115      (1,413)   
Interest expense  2,550      1,812   
Non-cash preferred dividend  1,198      1,065   
Depreciation, depletion, amortization, and accretion  21,323      12,630   
Exploration and geological and geographical expense  46      90   
Bonus accrual  828      799   
Equity based compensation expense  71      1,669   
Loss (gain) on disposal of assets  (801)      105   
Pipeline (payment) deficiency accrual       
Expired acreage (non-cash)  866      387   
Total Adjusted EBITDAX  29,177      14,361   

Cision View original content:http://www.prnewswire.com/news-releases/par-pacific-holdings-reports-third-quarter-2018-results-300745131.html

SOURCE Par Pacific Holdings, Inc.

Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd