Par Pacific Holdings Inc Stock

Good day, and welcome to the Par Pacific Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Jeff Hollis, Senior Vice President, General Counsel and Secretary. Please go ahead.

Thank you, operator. Welcome to Par Pacific's earnings conference call. Joining me today are Will Monteleone, President and CEO; Richard Creamer, EVP of Refining and Logistics; and Shawn Flores, CFO.

Before we begin, note that our comments today may include forward-looking statements. Any forward-looking statements are subject to change and are not guarantees of future performance or events. They are subject to risks and uncertainties, and actual results may differ materially from these forward-looking statements. Accordingly, investors should not place undue reliance on forward-looking statements, and we disclaim any obligation to update or revise them. I refer you to our investor presentation on our website and to our filings with the SEC for additional information.

I'll now turn the call over to our President and CEO, Will Monteleone.

Thank you, Jeff, and good morning, everyone. We're pleased to report strong second quarter financial results, driven by excellent operational and commercial execution. Amidst extreme volatility, each of our business units executed crisply and used the full commercial flexibility of our asset base to capture market conditions. System throughput ran at elevated levels through the peak margin window, and our commercial team optimized crude sourcing and product placement, generating excellent capture rates.

Refined product cracks remained materially above historical norms for the quarter. Our combined market index averaged approximately $33 per barrel, well above the 2025 average of $12.40 per barrel and exceeding the second quarter 2022 when the Russia-Ukraine conflict was intensifying. Reduced Persian Gulf and Russian origin refined product exports, Asian refiners running conservatively to preserve crude supply chain duration and protectionist policies restricting free trade drove these favorable market conditions. Looking forward, global refined product inventories remain tight and the structural factors supporting margins remain.

Turning to Retail. Same-store fuel volumes declined by 0.8%, while in-store sales increased by 1% compared to the second quarter of 2025. Despite pressure on fuel margins in a higher price environment, the merchandising and food programs continue to advance, strengthening the underlying earnings power of the segment.

On the strategic front, our Hawaii Renewables business made steady progress. Renewable diesel production ramped through the quarter with June throughput reaching approximately 3,000 barrels per day before we commenced the Hawaii plant-wide turnaround. In addition, we completed first commercial renewable diesel sales during the quarter. Volumes were small and reflect the early-stage nature of the commercial ramp, but they established the operational pathway from production to sales.

On the capital allocation front, we meaningfully strengthened the balance sheet during the quarter, reducing our term debt balance by over 20% via the inaugural senior unsecured notes issuance. We ended the quarter with total liquidity of approximately $1.4 billion, placing our balance sheet in a very strong position to pursue growth and continue to allocate capital thoughtfully through cycles.

In closing, our through-cycle discipline on operations, commercial positioning and capital allocation is what allowed us to convert an exceptional market environment into a durably stronger balance sheet and strong per share earnings. We remain focused on maintaining that discipline as market conditions evolve.

With that, I'll hand the call to Richard, who will walk through our Refining and Logistics results.

Thank you, Will. I want to begin by congratulating the Wyoming and Montana teams for the safe and efficient completion of their scheduled outages in April. In addition, the Tacoma team achieved a new record quarterly production rate of 41,200 barrels per day or 98.1% utilization through the second quarter. In Hawaii, the Q2 throughput was 73,200 barrels per day and production costs were $6.43 per barrel. The lower production versus plan was a result of the refinery experiencing end-of-cycle conditions.

The team delivered on all customer fuel requirements despite challenges associated with the ongoing conflict in the Middle East. The turnaround in Hawaii began in late June, and I'm pleased to report that the team executed the turnaround safely and cleanly while also delivering cost and schedules near target. At this point, the Hawaii turnaround is substantially complete and major operations have been safely restarted.

As I stated, Washington throughput set a new quarterly record at 41,200 barrels per day and production costs were $4.21 per barrel, capturing market conditions following the Q1 planned outage.

Shifting to Wyoming, throughput was 14,000 barrels per day and production costs were $15.28 per barrel, reflecting the April outage downtime and costs. Following the outage, the refinery has shifted to routine operations supported by strong seasonal demand.

Finally, in Montana, second quarter throughput was 53,000 barrels per day and production costs were $10.16 per barrel. The team executed the April crude outage safely, on time and on budget. In May and June, Par Montana Refining set new monthly throughput and OpEx per barrel records of approximately 62,000 barrels per day at $7.56 per barrel.

Looking ahead to the third quarter, we expect Hawaii conventional throughput between 59,000 and 65,000 barrels per day and renewable throughput between 1,500 and 2,000 barrels per day, reflecting the turnaround event in July through early August.

In the Mainland, Washington is expected between 40,000 and 42,000 barrels per day, Wyoming between 17,000 and 20,000 and Montana between 56,000 and 61,000. The Montana coker was down in July for routine maintenance and is expected to return to service by mid-August. From today's date, there are no significant planned downtime for the balance of the year. The Q3 midpoint throughput guidance is 182,000 barrels per day.

And now I'll turn the call over to Shawn to cover our financial results.

Thank you, Richard. Second quarter adjusted EBITDA was $571 million and adjusted net income was $499 million or $10.10 per share. Our Refining segment reported adjusted EBITDA of $552 million in the second quarter compared to $69 million in the first quarter, reflecting a sharp step-up in market conditions driven by the disruptions in crude and refined product supply.

Our combined refining index averaged approximately $33 per barrel, an increase of roughly $14 per barrel compared to the first quarter. System-wide refining capture was 125% or 112% on a normalized basis after adjusting for Hawaii price lag and Wyoming FIFO impacts.

Starting in Hawaii, the Singapore 3-1-2 averaged approximately $50 per barrel and our landed crude differential was $3.93, resulting in a Hawaii index of approximately $46 per barrel. Hawaii capture was 124%, including a net price lag benefit of approximately $77 million or $11.49 per barrel. Normalized for the price lag impact, Hawaii capture was 99%.

In Montana, the second quarter index averaged $25.76 per barrel with margin capture of 144%. Capture was well above our target range, driven by favorable clean product to asphalt sales mix and refined product inventory drawdowns that sustained volumes during the April outage.

In Wyoming, the second quarter index averaged $28.73 per barrel. Margin capture was 118%, including the benefit of refined product inventory draws during the April outage, partially offset by a $3 million FIFO headwind from declining crude oil prices.

In Washington, our index averaged $20.27 per barrel. Margin capture was 100%, supported by continued jet to diesel strength on the West Coast.

Turning to the Logistics segment. Adjusted EBITDA was $30 million in the second quarter compared to $32 million in the first quarter, reflecting reduced crude imports ahead of the Hawaii turnaround. In the Retail segment, adjusted EBITDA was $17 million compared to $15 million in the first quarter. The sequential improvement was driven by a partial recovery in fuel margins and continued growth in food service sales in both regions.

Moving to cash flow. Second quarter cash from operations totaled $614 million, excluding working capital outflows of $312 million and deferred turnaround costs of $19 million. The working capital outflows were primarily driven by building refined product inventories ahead of the Hawaii turnaround and higher commodity prices, which increased the value of hydrocarbon inventories. We expect a substantial portion of these working capital outflows to reverse as inventory levels normalize after the Hawaii turnaround and commodity prices stabilize.

Second quarter capital expenditures, including deferred turnaround costs, totaled approximately $59 million. During the quarter, we continued to benefit from our excess RIN inventories associated with the prior period small refinery exemptions. As a reminder, our adjusted EBITDA and adjusted net income reflect full RIN expense at current period RIN prices, which does not reflect the benefit of our excess RIN position. Our GAAP results by contrast include approximately $35 million gain in the quarter, representing the difference between current RIN prices and the book value of our RIN assets on our balance sheet.

Shifting to the balance sheet. We completed a $500 million offering of senior unsecured notes, reducing gross term debt by more than $130 million during the quarter. We also reduced ABL borrowings by $78 million, resulting in a total net debt reduction of over $220 million. Given the heightened market volatility during the period, we moderated our opportunistic share repurchase activity in favor of strengthening the balance sheet through debt reduction. Year-to-date, through the second quarter, we have repurchased approximately $48 million of common stock, including cash settled options. As of June 30, total liquidity was approximately $1.4 billion, and our cash balance was $185 million.

Looking to the third quarter, our July consolidated refining index was $31.34 per barrel or approximately $1.60 below the Q2 average. In Hawaii, the financial impact of the refinery turnaround will be concentrated in the third quarter, increased refined product imports are expected to hold capture below our typical guidance range. Our third quarter Hawaii crude differential is expected to land between $11.50 and $13.50 per barrel, reflecting higher freight costs and steeper backwardation.

Across our mainland system, distillate margins have remained firm and seasonal demand has been strong quarter-to-date. As Richard mentioned, Montana will complete its annual coker maintenance during the third quarter, resulting in roughly $6 million to $8 million of incremental OpEx and a heavier asphalt sales mix. In Renewables, we expect a gradual ramp in third-party sales volumes and earnings contribution as we restart the units following the Hawaii turnaround.

Overall, the second quarter demonstrated the significant earnings power of our business in a favorable market. Our strong balance sheet and liquidity position will provide financial flexibility to invest in strategic growth opportunities while maintaining an opportunistic approach to share repurchases. This concludes our prepared remarks. Sarah, we'll turn it back to you for the Q&A.

[Operator Instructions] Your first question comes from Matthew Blair with TPH.

Congrats on the strong results. I was hoping you could talk just a little bit more about the moving parts in Hawaii for the third quarter. So you mentioned with the turnaround in July, the capture would likely be below typical guidance. I think you also mentioned that you've been building inventory. So is it reasonable to assume that you're monetizing inventory throughout July to help offset the impact of the turnaround? Also, is there any increase in OpEx from the turnaround? And then finally, should we expect a timing headwind just based on Q3 -- sorry, quarter-to-date prices so far in Q3 in Hawaii?

Matt, it's Shawn. I'll take your last one first. I think it's too early to call the sort of price lag impact. It's really, as you know, the last month of each quarter and you look at sort of Singapore distillate prices. So I think just watch September Singapore pricing relative to June once that month prices out.

And then I think on capture, I sort of referred to it in the prepared remarks. We are expecting a more concentrated impact of the turnaround activities in Q3. We built refined products through imports late in Q2. But from a costing perspective, most of those imported barrels will be costed in Q3. So I would expect capture to likely come in below sort of typical normalized guidance of 100% to 110% because of those factors. I think on OpEx, I would say, a marginal increase. Most of the expenditures incurred during the turnaround are capitalized.

And just lower total crude throughputs, Matt, right, as you think about as the plant comes back online, it won't be at full rates for the entire quarter.

Okay. Sounds good. And then, Will, could you share any insights on the Singapore market, we have seen China refinery utilization pick up a little bit over the past month. It still is relatively low, you reported that China has been increasing product. Have you seen any of that? And yes, I mean, inventory picture in Singapore is, I guess, it still at new 5-year highest. But what are the moving parts you're seeing in the Singapore market?

Yes, Matt, I think continue to watch Chinese behavior closely. Obviously, it moves month-to-month. I would say despite, I think, some announcements and potentially some increases in crude throughputs, we've not seen any material change in exports of refined product as we look in the July and even the forward planning that we've seen at least through August. So again, I think, as you know, the data out of China is opaque and the best thing to do is to watch the vessel movements. And I think what we're seeing is limited increases in waterborne refined exports at this point in time.

And again, I think just as a reminder, we followed the Chinese policy over the last decade, and there's been a focus on internalizing their capabilities for many years. And again, I think you're seeing that behavior play out amidst this shock. And so again, I think that internal focus is probably the primary objective. And again, I think that's something to continue to watch over the course of years rather than months, but certainly the behavior that we're seeing.

Your next question comes from [ Alexa Breno ] with Goldman Sachs.

Are you able to give us any more color on the Hawaii turnaround. It sounds like from an operational perspective, it's tracking. I mean anything that surprised upside, downside? And then on the substantially complete piece, what specific units are left? And any thoughts on time line?

Sure, Alexa. This is Richard. The turnaround was scheduled for 30 to 45 days, 30 being the return of some of the early equipment, and we followed pretty well on track with that -- with the crude unit and reforming unit to produce gasoline on that 30-day window. Out on the outer edge of that, the 45-day window is really centered around the hydrocracker and the mechanical work is completed on it, and it's in the middle of catalyst activation and start-up at this point. So that's the status of the major equipment. The cost and schedule all came in, in close range to target. So no significant issues there.

Okay. That's helpful. And then just a follow-up. Can you talk about your latest thoughts on capital allocation priorities, whether that be around capital returns or potential for any bolt-on M&A or any other considerations?

Sure, Alexa. It's Will. Yes, I think what I'd say on capital allocation is it continues to be dynamic. And I think our past history really is a pretty good indicator of the framework that we deploy. And so I'd say if you look back, at times, we found that M&A is the most attractive capital deployment. And at others, you've seen us invest in growth inside the business like in our renewable fuels project. And then there's been other times where we've seen the opportunity to repurchase our own shares at attractive discounts to our view of intrinsic value.

And I think these opportunities, they come and go and based on many different variables. And ultimately, our focus is really just a disciplined view on creating long-term value on a per share basis. That's really how we think about the capital allocation priorities. And so at this point in time, I think we're spending a fair amount of effort developing internal small-scale projects that I describe as kind of singles and doubles that I think give us flexibility to achieve unlevered returns that are in the low 20s for refining logistics projects. And I think those are within our control. And these other opportunities involve a lot of external market forces. And I think being prepared and ready to move is a significant strategic asset. So I think our historical framework is the best thing to look at and guides the way we think about the future.

[Operator Instructions] Your next question comes from Jason Gabelman with TD Cowen.

I was hoping to get an update on how much of the NOL is left? When do you expect that to be exhausted just given the very strong earnings we've seen and then updated guidance on where tax rate can go once that is exhausted?

Jason, it's Shawn. Yes, I'd say the beginning point at the beginning of the year, our NOL balance was around $700 million. And just given the year-to-date performance, I would expect to utilize a substantial portion of that NOL this year. I think if current margins persist, we'll likely transition to a more typical federal tax position beginning in 2027.

Okay. Understood. And then maybe I was hoping to get your updated thoughts around small refinery exemptions. Any kind of sense on when you can expect to hear on your 2025 petitions and outlook for what that could do from a cash standpoint?

Sure, Jason. Yes, I think the -- I think any specific dates would be complete speculation, as you guys know, just kind of watching this. There's deadlines, there's legal obligations and all those things rarely seem to be binding on behalf of the EPA. So I think the key date we're watching is clearly, there's a September 1 compliance deadline for 2025. It's early August. So we would certainly hope to hear with adequate time ahead of that compliance deadline. As a reminder, we're in a favorable position with respect to the 2025 RIN positioning at this juncture. And I'll let Shawn go into the dollar magnitudes based on different scenarios for your benefit.

Yes, Jason, our mainland RVO is about 140 million RIN units for 2025. So a full exemption at all 3 of our refineries and at current RIN prices would be about $300 million and then a partial exemption would be half of that.

Got it. Maybe if I could just ask a follow-up on the Hawaii turnaround and kind of the outlook. I know you mentioned some of the working capital headwind in 2Q was related to Hawaii. I was hoping you could disclose around what proportion of the headwind we should expect to come back once Hawaii comes back online? And then based on what you're seeing in the market, do you anticipate landed crude costs to normalize beyond 3Q?

Yes, Jason, I'll take the first one. I would say roughly half of the outflow this quarter was directly related to building up refined product inventories in Hawaii. I think the balance is mostly related to just higher flat price and inventory values. So and then, Will, do you want to cover the crude?

Yes, Jason, I think the waterborne crude market has been volatile, as you can imagine. And we've seen, I think, is probably your best proxy to think about this is amidst kind of the peak concerns on crude supply, we saw ANS for June crude deliveries. So these would have traded in kind of the April, May time frame, trade as high as ICE Brent plus $18. So -- and then the moment that the straits appeared to be opening and did open for a period of time, we saw substantial excess waterborne crude available and the ANS deliveries for September delivery dropped to minus $6. So you can see it's almost a $25 a barrel swing in the span of 3 months in terms of crude delivery and I think, expresses the kind of volatility we're seeing. That said, I would just comment that at this point, despite the conflict reintensifying, we're not seeing crude differentials at peak levels like it was early -- in the early stage of the conflict in the kind of March, April time frame in the current market environment.

This concludes the question-and-answer session. I will now turn the call over to Will for closing remarks.

Great. This quarter represents an example of what strong execution can deliver against a favorable market backdrop. Looking forward, our focus remains on disciplined execution as the durable path to growing earnings and free cash flow per share over time. Thank you to the entire Par Pacific team for your focused efforts throughout the quarter, and thank you all for joining us today.

This concludes today's conference call. Thank you for joining. You may now disconnect.

Good day, and welcome to the Par Pacific First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Ashimi Patel, Vice President of Investor Relations. Please go ahead.

Thank you, Kim. Welcome to Par Pacific's First Quarter Earnings Conference Call. Joining me today are Will Monteleone, President and Chief Executive Officer; Richard Creamer, EVP of Refining & Logistics; and Shawn Flores, SVP and Chief Financial Officer.

Before we begin, note that our comments today may include forward-looking statements. Any forward-looking statements are subject to change and are not guarantees of future performance or events. They are subject to risks and uncertainties, and actual results may differ materially from these forward-looking statements. Accordingly, investors should not place undue reliance on forward-looking statements, and we disclaim any obligation to update or revise them. I refer you to our investor presentation on our website and to our filings with the SEC for non-GAAP reconciliations and additional information.

I'll now turn the call over to our President and Chief Executive Officer, Will Monteleone.

Thank you, Ashimi, and good morning, everyone. First quarter adjusted EBITDA was $91 million, and adjusted net income was $0.78 per share. First quarter results compare favorably against historical first quarter performances despite the lag effect of rapidly rising crude and distillate prices in Hawaii, off-season conditions in Wyoming, Montana and the planned Washington outage. Our facilities ran well across the system, setting a first quarter throughput record. This strong throughput allowed us to prebuild inventory ahead of planned maintenance outages. The Wyoming and Montana facilities have both completed their April outages on time and are prepared to run hard for the highly profitable summer months.

Over the past two months, refined product cracks surged to all-time highs, particularly in Asia due to the reduction of Persian Gulf Origin refined product exports, aging refiners reducing run rates and protectionist policies restricting free trade of waterborne refined products. As a result, the April Singapore 3-1-2 index is materially above historical norms, averaging over $72 per barrel compared with the 2025 average of $16 per barrel. These levels exceed prior highs observed during the early months of the Russia-Ukraine conflict. In addition, mainland seasonal cracks are also rallying to elevated levels.

Our commercial position and supply chain flexibility allows us to capture a substantial portion of the strong market environment. In addition, we have no crack spread hedges in place to position us to capture and improved market conditions. Looking forward, global refined product inventory buffers are drawing down aggressively, setting up for meaningful tightness over the summer months. We see many Asian refiners running at near minimum throughput rates, attempting to preserve crude supply chain duration versus maximizing profits.

Turning to the Retail segment. Quarterly same-store fuel and in-store sales decreased by 3.3% and 1% compared to the first quarter of 2025. Fuel volume and in-store results reflect shifting consumer refueling patterns associated with the rising flat price environment and the impact of 3 state level closures during the first quarter from Hawaii flooding events. On the strategic front, we achieved a major milestone with the successful start-up of the Hawaii Renewables Unit. This is a significant step for the renewables business, reflecting our disciplined commissioning approach.

We continue to test and optimize unit operations and are focused on establishing credit pathways. The policy backdrop continues to strengthen, and we remain constructive on the outlook for the project.

On the capital allocation front, we repurchased $28 million during the quarter at an average price of $38 per share. Since the program's inception, we've repurchased over 14 million shares or just over 20% of shares outstanding at an average price of $25 per share. Our total liquidity position of $938 million combined with a robust forward cash flow outlook, positions the balance sheet to support our strategic objectives and opportunistic share repurchase framework.

In closing, our consistent focus on reliable operations, commercial agility and disciplined capital allocation remains the foundation for capturing today's market opportunity and delivering long-term shareholder value.

With that, I'll hand the call to Richard, who will walk through our Refining and Logistics results.

Thank you, Will. I want to begin with a moment of recognition for each of our refining teams for an outstanding first quarter. The Hawaii team achieved a record quarter throughput and Montana achieved a record winter season throughput. In addition, Washington successfully completed their February turnaround, restarted operations and are operating at maximum rates. We are pleased that both Montana and Wyoming teams completed their April outages safely and are operating under normal conditions.

Par Pacific's success lies in the foundation of delivering production safely and reliably for our communities. The entire refining and logistics team continues to demonstrate that commitment. As Will referenced, we are pleased with the early operational results from the Hawaii renewable fuels facility. As a reminder, we brought the pretreatment unit online early this year and achieved on-specification product using a mix of feedstocks with additional inbound waste oils to further test our capabilities. We are now operating the pretreatment in tandem with the renewable hydro treater and achieved on specification renewable diesel in late April. We are beginning to transition operations to validate the sustainable aviation fuel mode.

Our first quarter conventional refining throughput was 184,000 barrels per day and we'll begin reporting renewable fuel throughput in the second quarter. In Hawaii, throughput was a record 90,000 barrels per day and production costs were $4.67 per barrel. Hawaii will begin its planned turnaround in late June, which is expected to last between 30 and 45 days. The renewable fuels unit will be off-line during the turnaround.

The first quarter Washington throughput was 23,000 barrels per day and production costs were $7.53 per barrel, driven by reduced rates related to the February planned downtime. The refinery is operating well and delivering fully restored capability.

Shifting to Wyoming, throughput was 15,000 barrels per day and production costs were $11.68 per barrel, reflecting lower seasonal throughput. As I mentioned, the spring refinery outage to address routine maintenance was completed successfully and safely.

Finally, in Montana, first quarter throughput was 57,000 barrels per day and production costs were $9.05 per barrel. The team continues to deliver on their plan of efficient operations and OpEx control.

Looking ahead to the second quarter, we expect Hawaii throughput between 77,000 and 81,000 barrels per day, reflecting the turnaround and Washington between 40,000 and 42,000 barrels per day. Due to the April planned maintenance across the Rockies system, Wyoming quarterly throughput is expected to be between 14,000 and 16,000 barrels per day and Montana between 45,000 and 49,000. This results in a system-wide midpoint throughput of 182,000 barrels per day.

I'll now turn the call over to Shawn to cover the financial results.

Thank you, Richard. First quarter adjusted EBITDA was $91 million, and adjusted net income was $39 million or $0.78 per share. Our Refining segment reported adjusted EBITDA of $69 million in the first quarter compared to $88 million in the fourth quarter.

Starting in Hawaii, the Singapore 3-1-2 averaged $36 per barrel during the first quarter and our landed crude differential was $4.90, resulting in a Hawaii index of $31.11 per barrel. Hawaii capture was 42%, including a net price lag headwind of approximately $125 million. As a reminder, net price lag reflects the Hawaii refineries contractual sales that are structured on prior month and prior week average pricing. The lag impact was driven by the sharp increase in refined product prices in March, resulting in adjusted gross margin trailing current period market conditions. We would expect price lag to be neutral in a stable pricing environment and to reverse into a capture benefit during periods of declining prices. Normalized for the lag impact, Hawaii capture was 92%, reflecting wider West Coast discounts relative to Singapore and lower netbacks on secondary products, such as naphtha and LPG.

In Montana, the first quarter index averaged $4.84 per barrel with a margin capture of 143%. Capture was above our target range driven by lower asphalt production and favorable sales mix relative to the index.

In Wyoming, the first quarter index averaged $19.30 per barrel, margin capture was 139%, including an $18 million FIFO benefit from rising crude oil prices.

In Washington, our index averaged $8.20 per barrel. Margin capture was 100% supported by favorable jet to diesel spreads.

Turning to the Logistics segment. Adjusted EBITDA was $32 million in the first quarter, in line with our mid-cycle run rate. Strong system utilization in Hawaii and Montana was partially offset by reduced crude activity in Washington during the planned turnaround. In the Retail segment, adjusted EBITDA was $15 million compared to $22 million in the fourth quarter. The sequential decline was driven by lower fuel margins, reflecting rapid increases in wholesale prices during the quarter.

Moving to cash flow. First quarter cash from operations totaled $162 million excluding working capital outflows of $185 million and deferred turnaround costs of $18 million. Working capital outflows reflect rising flat prices and higher inventory levels ahead of the April planned maintenance across our Rockies system.

Turning to RINs. We remain in an excess RIN position at the end of the first quarter, having monetized less than half of the RINs associated with the prior period small refinery exemptions. This position is expected to provide additional working capital inflows over the coming quarters. It's also worth noting that our first quarter adjusted EBITDA and adjusted net income reflect full RIN expense at current period market prices which does not capture the benefit of our excess RIN asset position. Our GAAP results by contrast, included an approximately $30 million gain in the quarter, representing the difference between current period RIN prices and the book value of RIN assets on our balance sheet. First quarter capital expenditures, including deferred turnaround costs, totaled $61 million.

Shifting to capital allocation. We repurchased $28 million of common stock during the quarter at an average price of $38 per share. Gross term debt at quarter end was $638 million remaining below the low end of our leverage targets. Looking ahead to the second quarter, our April consolidated refining index averaged $42 per barrel, an increase of $23 per barrel compared to the first quarter. In Hawaii, refining margins continue to reflect a tight refined product supply environment across the Pacific Basin. We expect our second quarter crude differential to be between $4 to $5 per barrel reflecting the extended crude supply chain we built earlier this year. From a financial standpoint, the impact of the upcoming Hawaii turnaround is expected to be limited in the second quarter with most of the impact shifting into the third quarter.

Across our mainland system, April refining indices increased by approximately $17 per barrel versus the first quarter, driven by strong distillate margins. As Richard noted, we had planned downtime in April across the Rockies system, but expect minimal financial impact as we drew down inventories previously built during the first quarter.

In renewables, we expect sales volumes and earnings contribution to be modest in the second quarter as we optimize operations and build inventory with a more meaningful ramp in the back half of the year following the Hawaii refinery turnaround. Overall, we are well positioned to deliver robust cash flow in the current margin environment, enabling us to further strengthen the balance sheet, pursue accretive growth opportunities and opportunistically repurchase our common stock.

This concludes our prepared remarks. Operator, we'll turn it to you for Q&A.

[Operator Instructions] Our first question comes from Matthew Blair with Tudor, Pickering & Holt.

I think that Par has probably the highest jet yield in the group. We believe it's roughly 15% or so, could you confirm if that's the correct estimate? And could you talk a little bit about dynamics in the jet market, both on the supply side as well as demand side. We are seeing wider jet versus diesel spreads, which looked like a nice tailwind into the second quarter.

Sure, Matt. This is Will. I think 15% is probably reasonable. And again, I some of this depends on some of our jet versus ULSD objectives. But as you indicated, given the spreads between jet and ULSD, we see a high -- an attractive economic incentive to try and maximize jet yields, particularly in the Pacific. And again, I think we have a number of projects underway to maximize jet yield in the Rockies.

And in terms of just the overall regrade spread or the spread between jet and gas oil, again, continue to see that to be strong as -- again, I think it's one of the more difficult molecules to make. And with the amount of crude distillation offline globally, it's a challenge. And again, given the loss in the Persian Gulf origin exports, which was a material supplier to Europe, we're seeing the Asian Market and the Indian refiners need to try and attempt to backfill some of Europe's jet requirements.

Sounds good. And then this Hawaii product lag headwind in the first quarter, $126 million, it sounds like that would likely reverse in the second quarter, but would you also get an additional benefit from the drop in Singapore gas oil prices so far? And I guess, do you have an estimate so far in April on what that might look like?

Matt, it's Shawn. Yes, I think it's too early to give an estimate on price lag. As you know, it really depends on where Singapore prices end up in June relative to March. I think you're right, it's down in the prop market, and it would suggest a reversal -- a partial reversal of the $125 million impact. But I think that's how you should think about it and look at June pricing once available.

Our next question comes from Alexa Petrick with Goldman Sachs.

I want to just jump in a little more to the Hawaii captures, recognize there was that price lag impact. But even if we adjust for it, I think captures looked like they were in the low 90% compared to your target of over 105%. So, can you just talk about some of the drivers there and then how that's tracking for Q2?

Alexa, it's Shawn. Yes, I'd call out two other elements that I think drove a 10% to 15% capture hit. One was typically we see West Coast pricing to a premium to Singapore in most historical periods. That flipped to a significant discount, particularly LA jet versus Singapore jet and LA diesel versus Singapore gas oil. We do have some contractual exposure to the West Coast. And so that was -- let's call it, 5% to 10% capture headwind.

And then the other sort of factor I called out is we do produce and sell naphtha and LPGs and whenever you see a blowout like we did where gas, oil and jet is pricing at such a premium to the secondary products, it creates a capture headwind. I think both of those dynamics have normalized heading into Q2. If anything, I think West Coast is pricing at a premium to Singapore. So, it's something that we're watching, not trying to make a call right now given the volatility, but those are the elements to keep an eye on.

Okay. That's helpful. And then maybe just a follow-up, sticking on Hawaii. It sounds like the planned turnaround is still tracking for end of June start-up. Can you just talk about the planning behind that? Is there any flex given the macro and just how investors should be thinking about the impact? It sounds like the majority of it is going to be a Q3 impact.

That's correct, Alexa. We already shifted it, I'll say, weeks and I think that's probably the extent of the flexibility that we have. And again, I think we really tie our decision on turnaround timing toward hydrocracker catalyst life. That's one of the key drivers in Hawaii. It's been roughly 6 years since we changed that catalyst out. And again, I think, have the objective of completing this over the summer periods just given the scheduling, the timing of the contractors and the work that we've done. So I think we have limited flexibility beyond where we sit today and have kind of the supply chain contractors and all the moving pieces in place to execute that on time and on budget.

Hold on, Richard's got a couple of things to add. So Richard go ahead.

Yes. Thanks, Will. Just one other comment that one of our primary goals is to absolutely ensure the product supply in the state of Hawaii as the only producer there. So timing around that is significantly considered in the execution start of the turnaround.

Our next question comes from Jason Gabelman with TD Cowen.

Maybe sticking with the Hawaii turnaround planning, throughput guidance is a bit light for Hawaii in 2Q. And I wonder to what extent that's some conservatism baked into guidance versus the Hawaii turnaround really starting in earnest the last week or two of the quarter. And then could you also discuss kind of how the landed crude cost dynamics will trend once Hawaii comes back online? Will that reflect the impacts of the conflict and higher freight and backwardation we're seeing in the market?

Yes. Sure, Jason. I think the throughput guidance reflects our estimate on the start time of the outage. And then again, I think working through, I'll just say, optimizing our crude supply chain, both extending the turnaround as well as our plans exiting the turnaround. So again, I think we're focused on kind of margin optimization through both the inbound and outbound elements of the turnaround.

In terms of landed crude differentials, I think it's too early to call. I'll say the third quarter differentials. I'd just keep in mind a couple of things. One is given the turnaround is ongoing and the length of our supply chain, we've been able to, I'd say, stay out of the market and the kind of teeth of the most extreme kind of hoarding events that we've seen over the last 30 to 60 days. That said, I think when you look at backwardation alone, our first half of the year, crude differentials reflect probably a near flat market structure. And if you just look at the current market structure today, between the front month contract and the third month contract, you're moving between $6 and $8 a barrel. So again, that's consistent with our risk management framework and ensuring that we're not taking flat price risk between the origin loading point and the delivery to Hawaii. So again, too early to call, but I think those are the factors to watch.

Great. I was also hoping to get your color on Singapore cracks more broadly. They obviously were extremely strong in the start of the conflict in -- through April, and it seems like they've converged with rest of world cracks. And I guess it's to be expected given if there are arbitrage opportunities, those are going to be taken advantage of and the differentials are going to tighten between regions. So are we in more of a, call it, stable is probably not the right word, but from a relative basis, are we in an environment where relative cracks make more sense here? Or just given the refinery capacity shut ins in Asia, there's potential for cracks to spike again moving forward?

Yes, it's a good question. I mean, I think our observations would be at the beginning of the conflict. Obviously, the most, I'll say, hoarding of product and I'll say, disruption between physical and financial markets, I think, emerged. And again, I think if anybody was short, Singapore cracks financially going into that, I think there was a fair amount of rush to cover that position. I think now you're seeing freight normalize. And again, kind of the ability to arbitrage products between the Atlantic and Pacific Basin, you're getting back into, I'll just say, transport parity economics, between Atlantic and Pacific Basin. So again, I think that's probably the right way to think about it assuming that no other major factors change, which I think is a big assumption. Again, I think for Asia to price materially above Europe, given that they're both in, I'm going to say, deficit positions needing to import product. Again, I think it's going to be a call on a competition between those two points to source and attract barrels.

Got it. And if I could just sneak one final one in. Just on the small refinery exemptions. I think you received $60 million RINs worth of exemptions last year. It sounds like you haven't monetized a large part of that. So if you get the exemptions this year reflecting 2025 exemptions, should we expect you to monetize most of that position?

Jason, it's Shawn. Yes, I think that's probably a fair assumption. We've monetized less than half to date. I think we're -- would prefer to have clarity from the EPA on 2025 exemptions before further monetizing both the historical excess and then any new relief that we would get related to 2025.

Our next question comes from Zach Parham with JPMorgan.

Can you just talk a little bit about how you're thinking about the buyback going forward? It seems like you slowed down as the stock price moved higher post Iran. With cracks where they are today, you're set to generate a significant amount of free cash flow in 2Q. Do you plan to be active in the market buying back your stock? Or are you comfortable with the cash just going to the balance sheet in the near term?

Zach, this is Will. I think our historical framework still holds today. And again, I think we've been in an excess capital position and I've taken an opportunistic framework towards our share repurchases. And so again, I think the cadence of our repurchase is going to be driven by our excess capital position forward outlook and really our view of intrinsic value. And I think when we see it trade materially below that, we'll seize that opportunity. So I think our framework is the right way to allocate capital through the cycle. And again, I think you should expect us to be more aggressive in our share repurchasing when we see deeper discounts, intrinsic value and then, I'll say, more moderate in our approach as we see it less attractive discounts to intrinsic value.

This concludes our question-and-answer session. I would like to turn the conference back over to Will Monteleone for any closing remarks.

Thank you, Kim. Q1 was a strong start to 2026, notably solid operational performance across the system, the successful April start-up of our renewable fuels unit and attractive share repurchases. Our focus remains on disciplined execution as the durable path to growing earnings and free cash flow per share over time. Thank you to our employees, and thank you all for joining us today.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, and welcome to the Par Pacific's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Ashimi Patel, Vice President of Investor Relations. Please go ahead.

Thank you, Drew. Welcome to Par Pacific's Fourth Quarter Earnings Conference Call. Joining me today are Will Monteleone, President and Chief Executive Officer; Richard Creamer, EVP of Refining & Logistics; and Shawn Flores, SVP and Chief Financial Officer.

Before we begin, note that our comments today may include forward-looking statements. Any forward-looking statements are subject to change and are not guarantees of future performance or events. They are subject to risks and uncertainties, and actual results may differ materially from these forward-looking statements.

Accordingly, investors should not place undue reliance on forward-looking statements, and we disclaim any obligation to update or revise them. I refer you to our investor presentation on our website and to our filings with the SEC for non-GAAP reconciliations and additional information.

I'll now turn the call over to our President and Chief Executive Officer, Will Monteleone.

Thank you, Ashimi, and good morning, everyone. 2025 was a year of meaningful progress. We navigated challenges, advanced key strategic initiatives, and generated substantial profits along the way. Full year adjusted EBITDA was $634 million, and adjusted net income was $7.56 per share.

2025 represents an excellent year for the enterprise and further validates the structural improvements we've made to the business. At the beginning of 2025, we laid out clear priorities for the year: one, execute major turnaround activity safely and on schedule; two, minimize the impact from the Wyoming crude heater event; three, advance and start up our Hawaii Renewables unit; and four, deliver on our cost reduction commitments.

Despite a volatile refining backdrop, we've largely achieved those objectives. We executed the Montana turnaround work safely and effectively, restored Wyoming to reliable operations, advanced the Hawaii Renewables project into commissioning, while forming a joint venture with world-class partners at an attractive valuation and strengthened our cost structure.

While no year is without challenges, the consistency of our execution reinforces our organization's commitment to excellence. In our business, financial success starts with operational reliability and safety. Overall, we made strong progress during the year, achieving record annual refining throughput. However, the Wyoming event was a reminder to the organization that we are never finished when it comes to safely and reliably operating our facilities.

One notable operational success was the sustained improvement in Hawaii throughput rates, following several years of focused effort by the team. Hawaii throughput averaged 84,000 barrels per day, approximately 4% above the prior 3-year average, reflecting sustained operational improvement by the team.

The logistics organization progressed key initiatives throughout the year and generated record segment profits, and retail once again delivered growing results, setting new financial records in 2025. Full year adjusted EBITDA increased approximately 13% versus 2024. 2025 same-store fuel and in-store sales grew approximately 1.6% and 1.5%, respectively, reflecting continued traction in merchandising initiatives and food programs.

In Hawaii, the renewable fuels project has progressed into commissioning and early start-up phases during the fourth quarter. We prioritized the readiness of the pretreatment unit and have successfully achieved on-specification feedstock with a range of inputs. We are in the final phases of operational readiness and expect to introduce post-treated feedstocks into the renewables unit in the next few weeks. While timing has extended modestly beyond original expectations, there have been no material operational issues. Our focus remains on safe start-up, operational stability and optimization towards steady-state performance. We are constructive on the medium-term economic outlook as the policy backdrop continues to improve.

A significant highlight for the year was the strengthening of our balance sheet. During the fourth quarter, we received proceeds from the Hawaii Renewables joint venture and began monetizing excess RIN inventory. Combined with solid underlying cash generation, these actions materially improved liquidity.

We ended the year with approximately $915 million in liquidity and 49.7 million shares outstanding, improving liquidity by 49% and reducing our share count by 10%, while competing -- completing key growth and reliability projects. A stronger balance sheet provides flexibility to invest through cycles, execute high-return internal projects and opportunistically repurchase shares when appropriate.

We enter 2026 positioned to continue expanding the earnings power of the business and driving long-term shareholder value. Refining markets are cyclical, and our strategy is not to predict short-term movements, but to structurally improve our position within the cycle, increasing distillate yield, enhancing logistics integration, improving capture rates and lowering our cost structure.

Over time, these efforts expand our mid-cycle earnings profile and strengthen durability. Our priorities for the year are clear and consistent with our long-term strategy. One, improve the mid-cycle earnings contribution of our Rocky Mountain assets through targeted high-return projects that enhance flexibility and capture; two, execute the Hawaii turnaround safely and on schedule; three, successfully start up and optimize the renewable fuels unit; and four, maintain disciplined and opportunistic capital allocation.

I'll now turn the call over to Richard to discuss Refining and Logistics operations.

Thank you, Will. 2025 reflected significant operational progress and improvement across Refining and Logistics business. Reliability is a cornerstone to success and last year's performance is representative of that. We were challenged early in the year by the heater outage in Wyoming, and the team there delivered an exceptional recovery. Throughout the year, we executed disciplined operating and capital spending across the system. The Refining and Logistics team delivered another record throughput year of 188,000 barrels per day, led by Hawaii's increased production rates.

I want to commend the Montana team for the execution of their largest-ever turnaround. Following this event, we reported record quarterly throughput of 58,000 barrels per day, demonstrating the site's potential. We continue to see the benefits of our reliability investments, and the team has made great strides in improving OpEx per barrel. I'd like to recognize Wyoming team for safely restoring operations after the Q1 crude heater incident, more than 1 month ahead of schedule.

Shifting to quarterly results. Fourth quarter combined throughput was 191,000 barrels per day. In Hawaii, throughput was strong at 87,000 barrels per day. This represents Hawaii's efforts to deliver at maximum capacity through the team's focus on high-reliability operations. Production costs were $4.15 per barrel. Washington throughput was 37,000 barrels per day, reflecting reduced rates ahead of the first quarter planned downtime and production costs were $4.57 per barrel.

Maintenance activities are now complete, and the plant restart is underway. Shifting to Wyoming, throughput was 14,000 barrels per day, and production costs were elevated at $13.27 per barrel due to a third-party power outage in Northern Wyoming and lower seasonal throughput.

Finally, in Montana, fourth quarter throughput was 52,000 barrels per day, and production costs were $11.74 per barrel, elevated by approximately $1.50 per barrel due to coker maintenance. Looking ahead to the first quarter, we expect Hawaii throughput between 85,000 and 89,000 barrels per day and Washington between 24,000 and 28,000 barrels per day, reflecting the Q1 planned outage.

Wyoming is expected to operate between 13,000 and 16,000 barrels per day with Montana between 52,000 and 56,000 barrels per day, both reflective of Q1 seasonality. This results in a system-wide anticipated midpoint throughput of 182,000 barrels per day.

I'll now turn the call over to Shawn to cover our financial results.

Thank you, Richard. Fourth quarter adjusted EBITDA was $113 million, and adjusted net income was $60 million, or $1.17 per share. For the full year, adjusted EBITDA was $634 million and adjusted net income was $390 million or $7.56 per share. The Refining segment generated $88 million of adjusted EBITDA in the fourth quarter, compared to $135 million in the third quarter, excluding the SRE impact. Our combined Refining index averaged $13.13 per barrel in the fourth quarter, down approximately $1.60 from the prior quarter, reflecting seasonal conditions in the Rockies and the Pacific Northwest.

System-wide Refining capture was 93% for the quarter and 94% for the full year. In Hawaii, the Singapore 3-1-2 averaged $21.43 per barrel during the fourth quarter, and our landed crude differential was $6.05, resulting in a Hawaii index of $15.38 per barrel. Hawaii capture was 104%, including a net $7 million loss from product crack hedging and price lag. Excluding these items, Hawaii capture was 110%.

In Montana, the fourth quarter index averaged $11.14 per barrel with margin capture of 72%. Capture was impacted by elevated asphalt sales and a lighter, higher cost crude slate due to coker downtime, reducing margins by approximately $10 million. Montana production costs include approximately $7 million related to coker maintenance.

In Wyoming, the fourth quarter index averaged $18.31 per barrel. Normalized capture was approximately 70%, excluding a $3 million FIFO impact from declining crude prices. As Richard mentioned, a regional power outage and subsequent maintenance activities reduced throughput and impacted both margins and production costs during the quarter. Lower diesel sales during the downtime impacted margins by approximately $4 million, while maintenance-related activity increased operating costs by $3 million.

In Washington, our index averaged $8.60 per barrel. Margin capture was 97%, reflecting a normalization of jet to diesel spreads and favorable sales mix during the Olympic pipeline outage in November.

Looking to the first quarter, our combined Refining index has averaged approximately $6.70 per barrel quarter-to-date with February month-to-date improving by $2 per barrel versus January. In both the Rockies and the Pacific Northwest, prompt distillate margins have strengthened by roughly $15 per barrel compared to January averages.

On the West Coast, tighter jet balances have driven jet fuel to trade at a premium to diesel, supporting margin capture in Washington. In Hawaii, Singapore distillate cracks remain firm, and we expect our first quarter crude differential to be in the range of $4.75 and $5.25 per barrel, reflecting easing backwardation and favorable access to waterborne crude supply.

Moving to the Logistics segment. Adjusted EBITDA was $30 million in the fourth quarter compared to $37 million in the third quarter. Full year logistics adjusted EBITDA reached a record $126 million, reflecting strong system utilization and a $6 million reduction in annual costs. Retail delivered $22 million of adjusted EBITDA in the fourth quarter, in line with the third quarter.

For the full year. Retail achieved a record $86 million in adjusted EBITDA, up from $76 million in 2024, driven by favorable fuel and inside store margins and a $4 million reduction in operating costs.

Turning to cash flow. Full year cash from operations was $568 million excluding working capital outflows of $21 million and deferred turnaround costs of $101 million. Cash from ops in the fourth quarter was $134 million, excluding working capital outflows of $40 million and deferred turnaround costs of $1 million. Q4 working capital outflows were primarily related to prepaid annual insurance premiums and trade credit timing in Hawaii, partially offset by RIN proceeds.

At year-end, we had monetized less than half of the SRE-related excess RIN inventory, providing favorable working capital visibility into 2026. Full year accrued CapEx, including deferred turnaround costs totaled approximately $246 million, or $6 million above our prior guidance. Cash used in financing activities totaled $64 million, driven by an ABL paydown of $163 million, share repurchases of $28 million, partially offset by $100 million in proceeds from the Hawaii Renewables joint venture.

For the full year, we repurchased 6.5 million shares, reducing shares outstanding by 10%, while lowering gross debt by $310 million. Total liquidity was a record $915 million at year-end. Gross term debt was approximately $640 million, positioning us at the low end of our leverage targets.

During the quarter, we repriced our existing term loan, reducing the spread by 50 basis points and lowering our annual cash interest by over $3 million. With improving market conditions and reduced capital requirements, we are entering 2026 from a position of financial strength with the flexibility to invest in growth, maintain a strong balance sheet and opportunistically repurchase shares.

This concludes our prepared remarks. Operator, we'll turn it back to you for Q&A.

[Operator Instructions] The first question comes from Alexa Petrick with Goldman Sachs.

I wanted to start on capital allocation. You talked about starting to monetize the access RIN bank. How should we expect that cash to be used? And then how are you thinking about share repurchases, particularly with the stock at these levels?

Yes. I think, our capital allocation framework remains consistent with how we've approached it in the past. I think we are looking at a mix of both the opportunity to repurchase our shares as well as internal growth opportunities and even potentially external opportunities. So I think if you look at our past, you'll see that we've used really all of the above when appropriate, to try and generate shareholder returns. And I think, we'll continue to deploy a dynamic approach to that given our strong excess capital position, we have a lot of flexibility.

Okay. That's helpful. And then maybe just a follow-up. Can you talk a little about Q4 on captures? I think Rockies was a little softer than maybe what we think about mid-cycle captures. Can you kind of walk us through some of the moving pieces there? And then how 1Q is shaping up so far?

Alexa, it's Shawn. Yes, I think in my prepared remarks, I touched on the softness that we saw in the Rockies. In Montana, we had 72% capture relative to our sort of annual guidance of 90% to 100%. And I think it's really driven by the coker downtime. We lightened up our crude slate while the coker was offline, and it also results in incremental asphalt sales. And we estimate about a $10 million margin impact. That translates to about 19% capture. So I think when you normalize for that, you're back within sort of that 90% to 100% range.

And then I think a similar story in Wyoming, we -- as Richard referenced, we had the regional power outage that impacted most of the state for a few days and led to a multiple-week downtime. And ultimately, I think it impacted diesel sales, which was about $4 million. And I think adjusting for that margin loss, Wyoming Capture would have been in the high 80s. So I think that the story is as simple as that.

The next question comes from Matthew Blair with Tudor, Pickering, Holt.

Will, maybe to just follow up on your comment there about looking at external growth opportunities. Could you talk a little bit more about what opportunities could that might be? Would that include retail integration, additional retail integration? Or are you also open to refinery acquisitions or even corporate acquisitions?

Yes, Matthew, happy to talk a little bit more about it. I think the best way to think about our framework is probably to look at our track record and to think about how we've operated in the past is a pretty good indicator of how we'll approach the future. And so I think, from our perspective, I think we are focused on growing the scale of the business when it's accretive. And again, I think we're trying to find opportunities that are synergistic with our existing portfolio where we can really generate an edge. And so that's our focus. And I think we hold 2 things to be true at the same time. I mean if you look at our history, we've grown this business through M&A., but I think we also fully understand that if you pursue growth at any price, you can destroy shareholder value very quickly, so being disciplined is important.

And I think what we found on the retail side is generally, we can be competitive in small acquisitions, 1 to 5 store and then we can be competitive on new builds and generate real returns in that area. Given the current market, larger-scale M&A and retail is less likely and more challenging given our competitors' cost of capital versus our own.

Sounds good. And then, Will, you also mentioned the cash coming in from the RIN sales. Do you have any update on potentially monetizing the Hawaii land, the excess land out there or potentially monetizing the Laramie E&P investment?

Sure. So on the land position in Hawaii, we're continuing to progress the redevelopment of that. And again, I think, are nearing completing, getting the equipment to grade, and are again, working through the process to rehabilitate that and get it back into, I'll say, into commerce. And so I wouldn't plan on that being an immediate benefit. I think this is a long-term project for us, that's going to take us several years, but I do think it's an attractive asset.

With respect to Laramie, I think the business there has continued to do well and has generated cash with its existing production, improved its balance sheet and has continued to improve, I would say, like I've mentioned in the past, we own 46% of Laramie, so we have influence, but we don't have control. And our view is that the best way to generate maximum value for our stake is to align with the other shareholders who have different time horizons than we do and ensure that we maximize the value of the business when they're ready to monetize.

And so again, I think the gas business is noncore to us. At the end of the day, though, we need to, I think, ensure that we are aligned with our partners to maximize the value and aren't selling a minority noncontrolling position.

[Operator Instructions] The next question comes from Manav Gupta with UBS.

I had a very quick clarification. Can you remind us of your sensitivity to the WCS differential? I think it was about $14 million per $1 of widening, but if you could reflect on that and then your view on the WCS differential itself with more Venezuelan crude coming into the United States?

Sure, Manav. Yes, so I think kind of a mid-cycle, we're roughly running between 40,000 and 50,000 barrels a day of WCS. And so it's basically every dollar is worth around $15 million to $16 million a year. So that's, I think, the best way to think about our sensitivity on that. And I think at the end of the day, we are an indirect beneficiary of incremental Venezuelan barrels on the Gulf Coast, really as it cascades and pushes Canadian barrels back up into the Mid-Continent. And so we're seeing less volume flowing out of Vancouver and West Ridge to the Far East, more barrels in Canada and increasing apportionment on the lines, which is all favorable for crude differentials moving back out towards our mid-cycle range of, let's call it, $15 to $16 under WTI.

This concludes our question-and-answer session. I would like to turn the conference back over to Will Monteleone for any closing remarks.

Thank you, Drew. 2025 was a year of meaningful progress. We set clear objectives, and we largely achieved them. We strengthened the balance sheet. We expanded the structural earnings power of the portfolio, and we continue to build a more diversified and durable business. Our objective remains constant to increase the mid-cycle earnings power and grow the free cash flow per share over time through disciplined execution. I want to thank all of our employees across the organization for their continued focus on safe and reliable execution. Thank you all, and have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, and welcome to the Par Pacific Third Quarter Earnings Call. [Operator Instructions] I would now like to turn the conference over to Ashimi Patel, Vice President of Investor Relations. Please go ahead.

Thank you, George. Welcome to Par Pacific's Third Quarter Earnings Conference Call. Joining me today are William Monteleone, President and Chief Executive Officer; Richard Creamer, EVP of Refining and Logistics; and Shawn Flores, SVP and Chief Financial Officer.

Before we begin, note that our comments today may include forward-looking statements. Any forward-looking statements are subject to change and are not guarantees of future performance or events. They are subject to risks and uncertainties, and actual results may differ materially from these forward-looking statements.

Accordingly, investors should not place undue reliance on forward-looking statements, and we disclaim any obligation to update or revise them. I refer you to our investor presentation on our website and to our filings with the SEC for non-GAAP reconciliations and additional information.

I'll now turn the call over to our President and Chief Executive Officer, William Monteleone.

Thank you, Ashimi, and good morning, everyone. We are pleased to announce strong third quarter operating and financial results. The organization fired on all cylinders as we safely and reliably throughput a near record 198,000 barrels per day, maximized logistics system utilization and delivered above industry trend retail results.

This crisp commercial and operational execution drove core financial results of $170 million and $2.10 in adjusted EBITDA and adjusted EPS, respectively. In addition, we captured the benefit of small refinery exemptions, resulting in an earnings boost of approximately $200 million. In total, third quarter adjusted EBITDA was $372 million and adjusted net income was $5.95 per share.

As we enter November, we are optimistic about the market outlook. Product margins are rallying in response to tight fundamental supply and demand balances and heightened geopolitical disruptions.

Our fourth quarter combined index averaged $15.55 per barrel in October, up from the third quarter. While we typically expect fourth quarter seasonal market conditions to taper off due to lower gasoline margins, our distillate production orientation is lifting our combined index.

The Retail business continues to deliver exceptional results, reflecting encouraging trends from improved focus on inside sales and gross margin. In particular, we're seeing improving food top and bottom line results. Quarterly same-store fuel and in-store revenue increased by 1.8% and 0.9% compared to the third quarter of 2024.

Looking forward, our development pipeline is expanding with the recent groundbreaking on our second new-to-industry store in the Pacific Northwest and an expanding list of attractive redevelopment or new-to-industry opportunities in Hawaii.

We've made considerable progress on our key strategic objectives this year. In Montana, we're pleased with a strong third quarter result, reflected both by record quarterly throughput and OpEx per barrel under our ownership. As throughput increases, we're quickly debottlenecking new constraints.

Like our other acquisitions, we have developed an attractive list of low-capital, high-return projects that will allow us to increase the mid-cycle earnings power of the Billings asset from our original expectations. These projects focus on improved logistics flexibility and efficiency, lighter crude processing, expanded hydrotreating capacity and enhanced jet and diesel production capabilities.

The Hawaii SAF project continues to progress towards startup. We've achieved mechanical completion and startup of the pretreatment unit and are encouraged by the early results. Focus has turned towards completing construction of the remaining reactors and associated systems. We are targeting mechanical completion by the late fourth quarter and startup shortly thereafter.

We are also pleased to announce the closing of the Hawaii Renewables joint venture with Mitsubishi and ENEOS in late October. We've received $100 million in proceeds and are excited by the prospects of this newly formed partnership.

Our balance sheet continues to strengthen, and we expect further improvement as we convert this quarter's strong earnings to cash and record the inflow associated with the Hawaii SAF joint venture. The combination of our strong financial position and solid operating momentum positions us to pursue growth and continue opportunistic share repurchases.

I'll now turn the call over to Richard to discuss Refining and Logistics operations.

Thank you, Will. Third quarter combined throughput was a strong 198,000 barrels per day, reflecting exceptional performance across all of our locations. We also achieved a new record low in Refining production costs at $6.13 per barrel.

In Hawaii, throughput was 82,000 barrels per day. In September, the team set a new monthly throughput record of nearly 90,000 barrels per day, partially offsetting crude delivery delays that occurred in July. Production costs were $4.66 per barrel.

Washington throughput was 39,000 barrels per day and production costs were $4.31 per barrel. Washington continues to excel in reliability and efficiency, capturing the benefits of a strong market environment.

Shifting to Wyoming, throughput was 19,000 barrels per day and production costs were $8.11 per barrel. The strong operating results and return to normalized production costs are reflective of the Wyoming team's execution and resilience to operational challenges earlier this year.

Finally, in Montana, third quarter throughput was a record high 58,000 barrels per day and production costs were a record low at $8.76 per barrel.

This quarter's performance is an example of the Billings refinery potential. Effective reliability investment and the team's strong execution is yielding operational and cultural benefits that are consistent with our acquisition objectives. In the fourth quarter, we do anticipate lower throughput and increased costs associated with routine [ coker ] maintenance.

Looking further into the fourth quarter, we expect system-wide throughput between 184,000 and 193,000 barrels per day. Hawaii throughput is expected between 84,000 and 87,000 barrels per day and Washington between 35,000 and 37,000.

Wyoming is forecasted to be between 15,000 and 16,000 barrels per day and Montana between 50,000 and 53,000. Both are reflective of seasonal market demand conditions. And Washington's lower Q4 throughput guidance reflects crude unit inefficiencies that will be addressed during the Q1 2026 planned outage.

I'll now turn the call over to Shawn to cover our financial results.

Thank you, Richard. Third quarter adjusted EBITDA and adjusted earnings were $372 million and $303 million or $5.95 per share. The Refining segment generated adjusted EBITDA of $338 million compared to $108 million in the second quarter.

Third quarter results include a $203 million gain associated with the full and partial small refinery exemptions granted for the 2019 through 2024 compliance periods. This gain reflects the expected cash benefit based on September 30 RIN prices and is included in our adjusted results since the related obligations were expensed in prior periods.

For comparability, our regional commentary on margin capture will exclude the impact of the SRE benefits. Starting with Hawaii, the Singapore 3-1-2 averaged $16.34 per barrel and our crude diff was $6.07, resulting in a Hawaii Index of $10.27 per barrel.

Hawaii margin capture was 111%, including a combined $11 million impact from product crack hedging and price lag. Excluding these items, capture was 125%, reflecting lower purchase product costs and steady clean product freight rates.

In Montana and Wyoming, margin capture was 93% and 91%, respectively, consistent with our target range and reflecting a return to normal operations following the second quarter turnaround and maintenance activity.

Lastly, in Washington, our index averaged $16.66 per barrel, margin capture was 69%, reflecting the widening discount of jet relative to diesel during the third quarter.

Looking to the fourth quarter, our combined Refining index averaged $15.55 per barrel in October, up nearly $1 per barrel compared to the third quarter, primarily driven by strength in the Singapore market. The Singapore 3-1-2 Index averaged $20.52 per barrel in October, an increase of over $4 per barrel compared to the third quarter average. We expect our fourth quarter Hawaii crude differential to land between $5.50 and $6 per barrel.

In the Rockies and the Pacific Northwest, distillate margins remained strong, partially offset by seasonal declines in gasoline and asphalt netbacks. Unplanned outages on the West Coast have narrowed jet to diesel spreads in October with prompt jet now trading at typical spreads to diesel in the Pacific Northwest.

Moving to the Logistics segment, third quarter adjusted EBITDA was a record $37 million, up $7 million from the second quarter. The improvement reflects the return to normal summer operations in Montana and Wyoming and higher system utilization in Hawaii.

In our Retail segment, third quarter adjusted EBITDA was $22 million compared to $23 million in the second quarter. Retail results continue to outperform our mid-cycle target, supported by strong in-store sales growth, improved cost control and solid fuel margins. This marks the third consecutive quarter of record LTM retail adjusted EBITDA, which now stands at $86 million.

Turning to cash flow, cash provided by operations was $219 million, including a working capital outflow of $147 million, primarily driven by higher RIN inventory associated with the small refinery exemptions. We expect the working capital impact to reverse over the next few quarters as we monetize our excess RIN position.

Additionally, our federal tax assets continue to enhance the cash conversion of our earnings. We began the year with an NOL balance of approximately $1 billion and have utilized over $375 million year-to-date, reducing our cash tax payments by $80 million.

Cash used in investing activities totaled $32 million in the third quarter. Year-to-date, accrued CapEx and deferred turnaround expenditures totaled $204 million with our full year outlook trending toward the upper end of our $240 million guidance.

Cash used in financing activities totaled $197 million, driven by an ABL paydown of $147 million and share repurchases of 16 million. Year-to-date, we've repurchased 5.7 million shares, reducing our basic share count by over 9%.

Shifting to the balance sheet, gross term debt as of September 30 was $642 million or 3x our LTM Retail and Logistics EBITDA, positioning us at the low end of our 3 to 4x leverage target. Quarter end liquidity increased 14% to $735 million, reflecting an excess capital position relative to our minimum liquidity of $300 million to $400 million.

Looking ahead, cash proceeds from the Hawaii Renewables JV and future monetization of excess RINS are expected to further bolster our liquidity position. With a strong balance sheet and constructive outlook, we're well positioned to pursue strategic growth and continue opportunistic share repurchases.

This concludes our prepared remarks. George, we'll turn it back to you for Q&A.

[Operator Instructions] Our first question comes from Matthew Blair with Tudor, Pickering, Holt.

Congrats on the strong results overall. I would say that Washington capture might have been a little bit lower than our expectations. Was that primarily due to the dynamics on jet versus diesel in the quarter? And if so, would you expect that to reverse out in the fourth quarter?

Matt, it's Shawn. That's correct. We sell a fair amount of jet fuel out of our Tacoma facility. Our index really reflects the diesel market dynamics. And we saw, at least in the Pacific Northwest, jet to diesel spreads north of $20 per barrel.

And as I mentioned in my prepared remarks, this spread is now compressed down to more typical levels. I think this morning, it's trading $4 to $5 per barrel discount to diesel. So we estimated that was about a 15% capture impact to Q3. I think adjusting for that, we're right sort of within our range of 85% to 95%.

Sounds good. And then could you also discuss the turnaround schedule for 2026? I think you might have mentioned some upcoming work at Washington. Are you also expecting any work at Hawaii or Wyoming? And what -- any further comments on the timing and total capital cost of this planned activity next year?

Matthew, it's Will. I think consistent with our prior disclosures, we're planning to conduct a turnaround in Hawaii next year. And we're going to have a small planned outage in Washington, as Richard referenced, to address some of the crude unit inefficiencies that we're seeing.

And then we have elected to defer the Wyoming turnaround, given the time we had inside the units during the outage earlier this year. So that's the main update on that front, and we'll be back in front of everybody in December with our expectations on capital requirements.

Our next question comes from Ryan Todd with Piper Sandler.

Maybe one first on cash. You should see a significant influx in cash over the next few quarters in the form of JV -- the payment from the JV and the reversal of the 3Q working capital headwind as you monetize the RINS from the SREs. And that's on top of the organic free cash flow that you're generating.

During the third quarter, you were more active strengthening the balance sheet compared to share buybacks. How should we think about your priorities for the use of all this cash going forward?

Sure, Ryan. It's Will. You're correct. I mean I think our balance sheet is improving quickly and is in good a shape as I've seen it. And again, I think that really positions us to both pursue growth as well as consider and weigh that against our share repurchase opportunity.

And so I'd say over the near term, we're focused on completing the construction on Hawaii Renewables project. And then as we kind of look into the future, we're looking at projects that can propel the Montana business mid-cycle EBITDA generation higher.

I'd say we see a mix of low capital and high-return implant projects as well as some enhanced logistics capabilities and market access opportunities that we see as most attractive in that area. And I would say, as always, we'll weigh that against the opportunity to repurchase shares. And I think given our capital position, we can really do all of the above.

Great. And then maybe just a follow-up to some of your comments earlier. I mean you're seeing quite a bit of strength in the Singapore margin environment. Can you maybe talk about what you're seeing there in terms of drivers, sustainability of that strength? And how you think about the sustainability outlook there at the Hawaii refinery?

Sure. You're correct, Ryan. I think we're seeing the Singapore margin environment at levels that would be almost consistent with, call it, the third quarter of 2023. So I think this morning, we saw gas, oil cracks at $30. It's the first time I've seen that in a long time.

And again, I think the drivers of this are you've got really -- you do have existing tight and low inventories across the OECD kind of major tankage positions. And then I think you overlay that on top of the disruptions that you're seeing from sanctions and the potential impacts on crude flows into both India and into China, and again, I think that's what has the market really focused on overall availability and supply of distillate as we head into the winter and as we work through pretty elevated and strong demand that we're seeing on the harvest side.

So I think those are the key things that we're seeing. And again, it is a strong backdrop, particularly for our distillate-oriented refineries.

[Operator Instructions] Our next question comes from Alexa Petrick with Goldman Sachs.

I wanted to ask, can you provide some color on early thoughts on how Q4 is shaping out? How should we think about captures quarter-over-quarter? You talked a little about the jet diesel differential, but maybe if you could expand on some of the moving pieces.

Alexa, it's Shawn. Yes, I think the Refining index overall, as we mentioned, at $15.55 per barrel up relative to the Q3. I would expect some seasonal dynamics to take hold as we get into the latter half of the quarter, particularly in the Rockies, as it relates to gasoline and asphalt netbacks. But as far as capture, I'll maybe just take through the different regions.

In Hawaii, our guidance is still around that 110% capture level. I think when you look over the last 2 to 3 years, we've averaged between 110% and 120%. And the elevated capture has really been linked to the elevated clean product freight rates, and we haven't really seen that change.

So I think the one thing I'd call out in Hawaii is we do have a small crack hedge book position. We typically layer that in 2 to 3 months in advance. And so like in Q3, I think it's fair to assume it's a marginal headwind going into Q4. But again, we typically only hedge about 15% to 25% of our Singapore exposure. So pretty minor impact in Hawaii.

In Tacoma, our mid-cycle guidance continues to be in the 85% to 95% range, should expect to see some favorable impacts on the jet to diesel dynamics. And partially offsetting those dynamics will be the asphalt netbacks worsening as you get into late November and December.

I think Montana and Wyoming, the market conditions are strong. Diesel margins, in particular, north of $45 per barrel in the upper Rockies. But again, I think as you get into December, we would expect some seasonal dynamics to take hold.

Okay. That's helpful. And then maybe to follow up, I mean, you guys have a high distillate yield relative to a lot of your peers. So curious as we think about incremental heavy barrels entering the market, how are you thinking about distillate going forward maybe relative to gasoline cracks? Or -- I'll kind of turn it to you on how you're thinking about the products.

Sure. Yes, we're typically in max diesel mode, I would say, across the majority of our refineries. I would say, max distillate mode. pretty much 100% of the time. And again, that's been the case in each of the markets that we're serving.

And I don't think we see a significant incentive to move to heavier barrels. And generally speaking, we're ensuring the crudes we're buying have adequate amounts of intermediates to fill up our downstream processing units, so we maximize the overall distillate yield.

So I don't see any major changes. And in general, the average barrel in the world definitely continues to get lighter, given our complexity configuration and location that tends to match up pretty well with what we do.

Our next question comes from Jason Gabelman with TD Cowen.

I wanted to ask about the RINS received from the small refinery exemptions. Are you going to pursue additional opportunities there for exemptions that you didn't receive in your refinery?

Some of your peers have discussed trying to submit additional petitions for 2018 to 2024 on refineries they think should have received RINS. So wondering if you're going to do the same or if you're satisfied with the outcome.

Yes, Jason, I mean, I think I'd tell you, we will avail ourselves of all opportunities that we think are consistent with the law and what the EPA is proposing and how the DOE is scoring the exemption petitions. And again, we've spent significant time on this over the last 7 to 8 years and I think have generally a good feel for how the EPA approaches and the DOE is approaching the scoring here.

So I wouldn't point out anything that I think is material to us right now. I think there are probably some things where we've -- we'll see clarifications over time, but I don't think it's anything I'd point out as material.

Okay. And connected to that, are you going to change the way that you go about managing your RIN liability moving forward and more directly ask just purchasing less RINS to cover your liability than you have in the past?

Yes. I think I'd prefer not to get into our commercial strategy and positioning on RINS. That said, I would tell you, at the end of the day, I think the law and the approach that the EPA and the DOE have taken or the approach they've taken is consistent with the law. I think we'd expect that approach to continue forward.

That said, I think in this area, as history would tell you, you have to be prepared for a wide range of outcomes. And again, I think we manage our commercial position as such, recognizing that there are, I'll just say, tail risks out there that we have to constantly be thinking about how we want to manage it.

But I'd say, our system gives us a fair amount of flexibility to ensure we can capture the benefit of the smaller refinery exemptions over time and certainly see this as a benefit and consistent with the law.

Yes. Understood. My follow-up is on Montana, which seem to run very well out of its turnaround. As you look forward, do you expect it to sustain these lower operating costs that are below, I think, your base case assumptions? Or do you view this more as a onetime benefit and OpEx should kind of move back above that $9 per barrel range?

Yes. Thanks, Jason. And I think you're right, it was a great and strong performance of the Montana team. I think you should expect seasonal improvements on OpEx per barrel as we ramp rates in the summer. And then I think as you get into the softer quarters, you'll see that start to taper down.

In general, what I'd tell you is we still think the $10 per barrel annual target is the right number for the Montana team. And again, I think we feel confident we're moving in the right direction to achieving that.

Ladies and gentlemen, this was our last question. I would like to turn the conference back over to William Monteleone any closing remarks.

Great. Thank you, George. With a high distillate yield and strong balance sheet, our enterprise is well positioned to grow and thrive in the current market environment. I want to congratulate our entire team on a strong operational and financial quarter. I hope everyone has a great day. Thank you.

Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Goodbye.