Par Pacific Q3 2026 Earnings Call Transcript

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Provided by Quartr
November 4, 2026

Key Takeaways

  • Positive Sentiment: Par Pacific reported adjusted EBITDA of $646 million and adjusted net income of $531 million, or $10.70 per share; results included a $222 million benefit from small refinery exemptions (SREs).
  • Positive Sentiment: Refining markets strengthened, with the combined market index reaching a quarterly record of $38.45 per barrel and averaging $41.34 in October. Management cited tight product inventories and expects Q4 throughput to rise to a systemwide midpoint of 200,000 barrels per day following planned maintenance.
  • Positive Sentiment: The company ended the quarter with $2.4 billion in liquidity and a net cash position, after repaying $243 million of ABL borrowings; it also repurchased $10 million of shares. A planned change to Hawaii’s crude intermediation facility is expected to reduce annual funding costs by about $14 million.
  • Positive Sentiment: Hawaii Renewables generated a profit in the quarter, with $5 million of adjusted EBITDA despite turnaround-related volumes running at about half of normalized levels. Management expects Q4 throughput of 2,800–3,400 barrels per day and said the business is progressing toward its approximately 4,000-barrel-per-day nameplate capacity.
  • Negative Sentiment: Management expects to use its remaining federal net operating losses in 2026 and become a regular federal cash taxpayer thereafter; full-year capital and turnaround spending is also expected to finish slightly above guidance. Executives noted that refining markets are cyclical, and current strong margins may not persist.
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Earnings Conference Call
Par Pacific Q3 2026
00:00 / 00:00

There are 10 speakers on the call.

Operator

Good day, and welcome to the Par Pacific third quarter 2026 earnings conference call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Ashimi Vitter, Vice President of Investor Relations. Please go ahead.

Speaker 1

Thank you, Sarah. Welcome to Par Pacific's third quarter earnings conference call. Joining me today are Will Monteleone, Richard Creamer, Shawn Flores, and Jerry Stumbo. 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.

Speaker 2

Thank you, Ashimi, and good morning, everyone. Before I turn to results, I want to note a leadership transition in our refining and logistics organization. After many years of outstanding contributions, Richard Creamer is transitioning to a senior advisor role ahead of his retirement next spring, and Jerry Stumbo has joined us as Executive Vice President of Refining and Logistics. Richard built a reliable, disciplined operating organization that is a significant part of the results we are reporting today, and we are fortunate to retain his counsel through the transition. Richard will walk through our operational results on today's call, and Jerry will take that role beginning next quarter. I'm excited to welcome Jerry to the team and believe his experience, character, and resilience will be critical ingredients to drive our operations to the next level.

Speaker 2

I couldn't be more excited to work side by side with him to build an even stronger business. Turning to the quarter, strong financial results were driven by solid reliability and commercial execution from our core operations. Third quarter adjusted net income was $10.70 per share. Adjusted EBITDA was $646 million, including a small refinery exemptions benefit of $222 million. We safely and successfully completed Hawaii's plant-wide turnaround and returned the facility to full operations, and our mainland refineries ran well during the peak summer margin environment. The refined product market environment strengthened through the quarter, and our combined market index averaged a quarterly record of $38.45 per barrel, nearly three times the 2025 average of $12.40 per barrel.

Speaker 2

Constrained Persian Gulf and Russian refined product exports, restricted Asian refiner throughput, and continued trade protectionism remained critical factors that limited refined product supply. Demand remained resilient. Looking forward, global refined product inventories remain tight, and structural factors supporting refining margins remain intact. Overall, Asian refinery runs remain constrained as the ability to run long-haul import-export refineries in an elevated freight rate environment faces pressure. Increasing waterborne LNG prices are also major factors for both Europe and Asia as we head into winter. The value of local manufacturing is going up in a more volatile world. Turning to retail, same-store fuel volumes and in-store sales increased by 2.1% and 1.9% respectively, compared to the third quarter of 2025, reflecting continued momentum.

Speaker 2

Our enhanced food offering remains a key driver of in-store performance, with food sales growing 11% over the same period and now representing more than 10% of total in-store sales. There is plenty of room to grow this valuable revenue stream. We are also encouraged by the early performance of our most recent new-to-industry location, which is exceeding underwriting expectations and demonstrating the value of our differentiated food and merchandising strategies. On the strategic front, our Hawaii Renewables business reached an inflection, generating a profit during the quarter. Renewable diesel production ramped quickly following July's turnaround, with September throughput of approximately 3,700 barrels per day. Just as encouraging, the business is operating at a competitive OPEX per gallon, which is central to the long-term durability of the platform. Separately, the sale of Laramie Energy remains on track to close in the fourth quarter, subject to customary closing conditions.

Speaker 2

We expect to receive approximately $120 million in cash proceeds at closing, with additional fixed and natural gas price-based consideration over the following five years. Our balance sheet is in the strongest position in the company's history. We ended the quarter with total liquidity of approximately $2.4 billion, and for the first time, the company is in a net cash position. This is a meaningful milestone and a major strategic asset for a cyclical business. Our focus remains on day-to-day reliability, executing low-capital, high-return growth projects, and opportunistically repurchasing shares. In closing, continued operational discipline, commercial execution, and capital allocation are translating a constructive market into durably stronger free cash flow per share. With that, I will hand it over to Richard, who will walk through our refining and logistics results.

Speaker 3

Thank you, Will, and good morning. Let me begin by welcoming Jerry to the team. I am excited that he is here, and I look very forward to the bright future for him and Par Pacific ahead. Hawaii had a busy quarter, and I want to recognize the logistics team for their excellent hurricane preparation and response, along with the well-executed change-out of the single-point mooring system. In addition, the refining team successfully executed their turnaround, ending with a quality one-time refinery restart. We are very proud of the Hawaii team and their efforts to reliably support the entire island community. Third quarter refining throughput was 174,000 barrels per day. In Hawaii, throughput was 57,000 barrels per day, and production costs were $8.45 per barrel. The lower throughput was related to extended turnaround

Speaker 3

The refinery is now positioned for a five-year run and is benefiting from several project completions that support the improved onstream reliability and annualized capacity. Hawaii Renewables throughput was 78,000 gallons per day, and production costs were $0.38 per gallon. Following the turnaround, we saw strong throughput rates and continue to broaden and prove out our feedstock flexibility. In Q3, we successfully processed canola, yellow grease, and tallow feedstocks. Our forward focus shifts to sustaining reliable operations and optimizing the pretreatment and hydrotreater units. Shifting to Washington, throughput was 40,000 barrels per day, and production costs were $4.68 per barrel. In Wyoming, throughput was 19,000 barrels per day, and production costs were $9.27 per barrel. In Montana, throughput was a quarter record, 58,400 barrels per day, and production costs were $10.41 per barrel.

Speaker 3

Excluding $6 million of OPEX related to coker maintenance, routine production costs were $9.29 per barrel. It's worth a moment to reflect on the progress we've made at Billings since the acquisition. Prior to our ownership, the refinery operated at approximately 50,000 barrels per day, with production costs exceeding $12 per barrel. Through disciplined reliability investments and consistent execution, we've increased throughput to 56,000 barrels per day year to date, while reducing production costs to below $10 per barrel. With the stronger operating foundation in place, we are adjusting our focus to the next phase of high-return growth projects and logistics improvements to further enhance the refinery's earnings potential. Moving to the fourth quarter, with our planned maintenance events behind us, refining throughput guidance reflects strong Q4 demand.

Speaker 3

We expect Hawaii between 85,000 and 89,000 barrels per day, Washington between 39,000 and 42,000, Wyoming between 16,000 and 18,000, and Montana between 53,000 and 57,000, resulting in a systemwide midpoint of 200,000 barrels per day. Hawaii Renewables throughput is expected between 2,800 and 3,400 barrels per day, reflecting continued feedstock optimization and operating flexibility. I'll now turn the call over to Shawn to cover the financial results.

Speaker 4

Thank you, Richard. Third quarter adjusted EBITDA was $646 million, and adjusted net income was $531 million, or $10.70 per share. Our third quarter results include a gain related to the 2025 small refinery exemptions of $222 million in adjusted EBITDA and $187 million in adjusted net income. These amounts reflect the expected pre and post-tax cash benefits based on September 30th RIN prices. For comparability, the upcoming refining segment commentary will exclude the impact of these SRE benefits. The refining segment generated third quarter adjusted EBITDA of $396 million compared to $561 million in the second quarter. Our third quarter combined refining index was $38.45 per barrel, an increase of approximately $5.50 per barrel compared to the second quarter. Systemwide capture was 86%, reflecting the impacts of Hawaii contractual price lag and turnaround activities. Excluding these items, normalized capture was approximately 98%.

Speaker 4

Starting in Hawaii, margin capture was 54%, including a net price lag headwind of $52 million, or $10 per barrel. Capture was also impacted by June turnaround downtime, with the associated margin effects recognized in the third quarter. Normalizing for these items, Hawaii capture was 97%. In the Rockies, combined capture was 109%, supported by strong seasonal demand in Montana and a $9 million FIFO benefit in Wyoming. In Washington, capture was 89%, reflecting a normalization of West Coast jet to diesel spreads compared to the first half of the year. Shifting to our newly created renewables segment, renewables adjusted EBITDA was $5 million, reflecting supportive environmental credit prices and renewable diesel margins. Due to downtime associated with the refinery turnaround, third quarter renewable throughput and sales volumes were approximately half of what we would expect at normalized operating rates.

Speaker 4

Turning to logistics, adjusted EBITDA was $31 million in the third quarter, partially impacted by lower asset utilization during the Hawaii turnaround. Our retail segment reported adjusted EBITDA of $19 million in the third quarter compared to $17 million in the second quarter, reflecting improved fuel margins during the first half of the quarter. Moving to cash flow, cash from operations was $839 million, including a $387 million working capital inflow and $50 million of turnaround expenditures. The working capital inflow primarily reflected the reversal of elevated receivables and equity-funded product inventory from the second quarter. Despite the large inflow, our year-to-date working capital change remains an outflow of over $110 million, which we would expect to unwind as commodity prices decline. Separately, during the quarter, we sold approximately $200 million of excess RINs associated with our 2025 small refinery exemptions.

Speaker 4

Approximately half of the cash proceeds settled during the third quarter, with the balance expected in the fourth quarter. Third quarter capital expenditures, including turnaround costs, totaled $87 million, bringing our year-to-date spending to $205 million. With our major maintenance activities behind us, we expect full-year capital and turnaround costs to finish slightly above our 2026 guidance range. Shifting to the balance sheet and capital allocation, we fully repaid our ABL borrowings of $243 million and repurchased $10 million of common stock during the third quarter. As of September 30th, total liquidity was $2.4 billion, including a cash balance of $731 million. As part of our ongoing efforts to optimize our capital structure, we expect to terminate our Hawaii crude intermediation facility in the near term.

Speaker 4

We plan to use approximately $150 million of cash on hand to repurchase the related inventory and transition the collateral to our ABL facility, reducing annual working capital funding costs by approximately $14 million per year. Finally, we expect to fully utilize our remaining federal NOLs this year. We entered 2026 with approximately $775 million of NOLs, providing a significant cash tax benefit of over $160 million. With these NOLs fully utilized, we anticipate becoming a regular federal cash taxpayer going forward. Looking to the fourth quarter, our combined refining index averaged $41.34 per barrel in October, or $3 per barrel above the third quarter average. In Hawaii, we expect our fourth quarter crude differential to land between $9 and $11 per barrel, reflecting crude purchases made during the third quarter.

Speaker 4

Quarter to date, Hawaii capture is supported by higher clean product freight pass-through rates and wider West Coast to Singapore distillate spreads. Across our mainland system, we are well-positioned to benefit from the widened Brent to WTI spreads and heavy crude differentials, particularly in Washington and Montana, where our combined heavy crude throughput averages 50,000 barrels per day, or 25% of our system-wide feedstock mix. Overall, we enter the fourth quarter with a strong outlook and significant financial flexibility. Looking ahead to 2027, we see attractive opportunities to compound recent earnings through organic growth investments while maintaining an opportunistic approach to share repurchases. This concludes our prepared remarks. Sarah, we will turn it back to you for Q&A.

Operator

Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Please ensure that your phone is not on mute when called upon. Thank you. Your first question comes from Matthew Blair with TPH. Your line is open.

Speaker 5

Great. Thanks, and good morning, and congrats on the strong results. Hoping you can talk a little bit more about the impact of rising tanker rates on your business. You provided that $9-$11 per barrel Hawaii crude diff in Q4. Is there any idea where Q1 is trending so far on that metric? And then clean rates are also moving up. Could you talk about how that supports you in the Hawaii product market? Thank you.

Speaker 4

Hey, Matthew. Good morning. Thanks for the question. Yeah, I will start by sort of giving some context on Q4, and we typically do not give guidance out beyond the upcoming quarter, but I think I can help sort of set the stage in what we are seeing in the prompt market. As I mentioned, the fourth quarter Hawaii crude diff is guiding between $9 and $11 per barrel, which is actually softer relative to the third quarter. And just keep in mind, we are typically buying crude two to three months in advance, and so that is really indicative of crude that we bought in the early part of Q3. Obviously, since then, dirty freight and market structure have widened materially. I think the best proxy to look at is delivered ANS differentials to the West Coast.

Speaker 4

Over the last two to three months, those differentials have widened by $10 to $15 per barrel. I think that gives you some context of the types of crude that we are competing against in the market. Keep in mind, as you mentioned, we have meaningful offsets to the dirty freight exposure on the sort of revenue side. All of our contracts include clean product freight pass-through rates, and over the same time period, those rates are up $6 to $8 per barrel. We also have a fair amount of exposure to West Coast pricing, and when you look at L.A. versus Singapore spreads, particularly on the distillate side, those have been averaging $30-$40 per barrel relative to about $5 per barrel in the third quarter. Those are meaningful offsets that we expect to support capture in Hawaii.

Speaker 4

Those may not sort of materialize exactly in the same quarter. The clean product freight comments and West Coast spreads is a prompt comment, and obviously, we have the lag on the crude side. I think the other thing that I just wanted to remind you of is our exposure to the heavy Canadian crude differential on the mainland. We run about 50,000 barrels a day of heavy crude. We have seen those differentials widen out by $15 per barrel over the last month or so. I mean, overall, our system, I think, provides a really natural balance between Hawaii and the mainland, and I think we are able to offset much of the waterborne freight and Brent to WTI spreads that you are seeing in the market. Will, anything else you would like to add?

Speaker 2

No. I mean, I think, Matthew, the only thing I would point out too is keep in mind that delivered waterborne freight number, or the delivered all-in crude cost to Hawaii is really made up of three factors, right? It is kind of the origin point or FOB differentials on crude, freight, and then market structure. I would just point out that if what we are seeing is in regions that are exporters of crude that are an extended distance from their typical markets are having to discount the FOB crude in order to clear into the market. In the same time period, we have seen FOB crude differentials move from +3 to five to -5 to eight in certain markets. Again, there is a number of variables that move in ensuring that crude is clearing the market, and I think I just point that out.

Speaker 2

I think Shawn gave you the best proxy with respect to the delivered ANS values, and that gives you a good sense of where the market is today.

Speaker 6

Hey.

Operator

Your next question comes from John Royall with Piper Sandler. Your line is open.

Speaker 7

Hi, good morning. Thanks for taking my question. My first question is just on potential M&A. We've seen some activity out in the market, across the size spectrum for independent refiners. Bless you. Can you just update us on how you're thinking about refinery M&A more broadly post-Billings, and if there's any geographic white space that you'd like to fill in?

Speaker 2

Sure, John. It's Will. I think broadly, there's not a lot that's changed in our M&A framework. I think we continue to be focused in areas where we would have significant synergies, and ultimately, that's principally in the Western U.S. that would plug into our existing network. That said, I don't think we're in a rush to try and get things done, and I would recognize that we're in a very attractive margin environment, which typically is a challenging environment for which a buyer and a seller to get together, notwithstanding recent activity.

Speaker 7

That makes sense. My follow-up is on the balance sheet and having the ABL at zero and over $700 million of cash on the balance sheet, a great position to be in. My question is, do you expect to keep the ABL at zero and finance your working capital with cash from here, or should we expect those balances to move back up a little bit?

Speaker 2

Yeah. Hey, John. It's Will again. I think on just broader capital allocation, I would just say, our capital allocation framework remains consistent. I say first and foremost, we're a growth company and are focused on building shareholder value over the next 5-10 years. In a cyclical business, maintaining excess capital after a period of near-record margins is particularly valuable. We've seen this time and again in the refining business, that balance sheet strength really affords us flexibility to be prepared to act when inevitably the cycle's going to change. In terms of priority, I would just say we're always going to challenge ourselves and rethink our position, and I'd point you to the past to really understand how we're dynamically thinking about things and ensuring that we're deploying capital in the most effective and risk-adjusted manner.

Speaker 2

I mean, since 2023, I would point you to, we've repurchased our shares and have found that to be a particularly valuable allocation and deployed nearly $360 million and reduced our share count by 20%. At other times, you've seen us active on the M&A side, and it is difficult to predict when those opportunities emerge. At other times, you've seen us execute organic capital projects, like the approximately $100 million opportunity at Hawaii Renewables. I really just give you that context because it gives you a sense of how we think. I'd also just say at the same time, we don't rest on our past and remind ourselves that we're only as good as our next capital deployment decision.

Speaker 7

Okay. Thank you, Will.

Operator

Again, if you have a question, it is star one on your telephone keypad. Your next question comes from Jason Gabelman with TD Cowen. Your line is open.

Speaker 8

Yeah. Hey, thanks for taking my questions. You mentioned in your prepared comments that you're shifting to high-growth projects in Montana, and you've kind of increased capability in Hawaii out of the turnaround. Wondering if you could walk through some of the details on that, any color on potentially increasing crude flexibility, and/or the future ability to increase capacity at the sites.

Speaker 2

Yeah. Sure, Jason. It's Will. I think in Hawaii, the opportunities we're pursuing there are really to increase our ability to run lighter crudes. I would say it's early, but we're encouraged by the rates that we're seeing out of Hawaii post-turnaround. I've found, again, there's times where we're able to get over 90,000 barrels per day. Again, I think it's too early to call that consistent, but I think we're encouraged by the results we're seeing there. In Montana, I would tell you it's about a mix of crude flexibility, but then also product yield flexibility. Again, I think we've got a number of projects that we think are going to expand our capabilities to run a range of inland crudes.

Speaker 2

We also have a number of debottlenecking projects that are underway, and these are probably less than $10 million projects that will allow us to expand our diesel production or our jet production by up to 1,000 barrels per day. Again, other projects inside the alkylation units that will allow us to debottleneck that unit by 10%-20%. Again, lots of low-hanging fruit in Montana that we're seeing. Again, I think we're excited to have a stronger operating foundation to start from that we can execute on some of these projects.

Speaker 8

Mm-hmm. Great. My other question, just on the SRE disclosure. Once you monetize these $200 million worth of RINs, you'll still be current on your current RIN compliance?

Speaker 4

Hey, Jason. It's Shawn. That's correct. Our sort of purchase cadence remains consistent with how we've approached it in the past. The RINs that we've sold that I referenced at $200 million is truly excess RINs. We'd like to maintain a sort of assets that fully offset the potential obligation in the future.

Speaker 8

Got it. If I could just squeeze one last one in. There's obviously been product pipelines announced going west by some of your peers as you look at kind of inorganic opportunities and logistics opportunities in kind of the western region of the country. Are those potential projects that can fit in your portfolio?

Speaker 2

Yeah, Jason, I think I would say we look at lots of different opportunities, including those on the logistics side. Generally speaking, I think we're trying to find opportunities that have a build multiple that would be attractive for our cost of capital. Again, I think they're going to be probably smaller opportunities that fit within our core markets versus adding on to some of those long-haul pipes that are probably more focused on clearing MidCon barrels to the West Coast.

Speaker 8

All right, I'll leave it there. Thanks.

Operator

Your next question comes from Josiah Knight with Goldman Sachs. Your line is open.

Speaker 9

Hey, good morning, team. Thank you for taking my question. I guess first one on China, these reports of refined products coming out the region, or more coming out the region. Can you just talk about what you're seeing in real time, and then how you see this evolving over the near to medium term?

Speaker 2

Sure. This is Will, Josiah. Thanks for the question. I think big picture, our view of Chinese policy and approach is really unchanged from where it's been. I would just characterize that broadly as you're seeing refined product exports at flat to down over the last five years, as they've rationalized their approach to, let's just call it internally focusing on serving the Chinese market for petrochemicals as well as transportation fuels. So, we believe that framework remains the same. It's going to be volatile quarter to quarter based on the timing and frequency of export quotas. Again, I think that's the main, I'll just call it quarterly release valve that we're monitoring. Again, I think we did see some increase in exports during parts of the third quarter.

Speaker 2

Again, it does look like there's, again, increased quota volume available in the fourth quarter. That said, I'd point out the Northeast Asian product balances are dynamic. China's clearly a factor. That said, a number of refineries that operate in Northeast Asia have long-haul freight on crude and are export-oriented and so have to pay the clean product freight outbound to try and clear the refined products in the market. So, given the dynamics on both the dirty freight as well as the clean freight side, you're in a more challenging environment if you're an export-oriented refinery in Asia.

Speaker 9

Got it. That makes sense. Then the follow-up just on renewable diesel. You guys broke it up this segment in EBITDA, which is nice to see. Can you just walk us through how you plan on continuing to ramp this segment, maybe from a volume perspective? Additionally, any color you have on how you think about mid-cycle profitability for the segment?

Speaker 4

Yeah, Josiah, it is Shawn. I think Richard provided our fourth quarter guidance, midpoint around 3,000 barrels a day. Our nameplate capacity there is closer to 4,000, so I think we will continue to make progress in getting it up closer to nameplate over the coming quarters. When we underwrote this project, we underwrote it at 40% IRR returns, which I think implies about a $35 million a year EBITDA contribution. We did $5 million in Q3. Obviously, volumes were about half of what we would expect in normal operating conditions. So, I think that gives you a sense of sort of the margin potential in this type of margin environment. So, I think the historical framework is the right one to go off of for now at $35 million a year. I think we would just note that the current margin environment is probably better than our underwriting case.

Speaker 9

Got it. That makes a lot of sense. Turning back. Thank you.

Operator

Your next question is a follow-up from Matthew Blair of TPH. Please go ahead.

Speaker 5

Hi. Thanks for taking the follow-up. Did you have a baseline on what we should think about for SREs for next year? So, essentially the 2026 SRE applications that you would potentially receive in 2027. Do you think investors should just pencil in zero here because absolute refining profitability was so strong in 2026? Or is it more of a relative calculation, and so the small refineries would still have a case to receive SREs? Thank you.

Speaker 2

Yeah. Thanks for that easy question, Matthew. I appreciate it. No, I think very difficult to predict the approach that will be taken on a year-to-year basis. Again, I think our current baseline would be that the law and the approach that the DOE and the EPA go through remains consistent. Again, the scoring frameworks are relative. Ultimately, I think that's probably the best way in which to evaluate the baseline, which again, I think, again, you've got two years of history at which point to use as, I think, your best guide for the future. There's nothing that we've seen in the law or in the approach that we're seeing taken that suggests a different approach going forward.

Speaker 5

Thanks for your comments.

Operator

There are no further questions at this time. I will now turn the call back to Will Monteleone for closing remarks.

Speaker 2

Thank you all for joining today. The third quarter was a strong continuation of a year defined by execution, notably the successful completion of our Hawaii turnaround, our renewable business turning profitable in its first full quarter of operations, and reaching a net cash position for the first time in the company's history. 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 for their focused effort through the quarter, and thank you all for joining us today.

Operator

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

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