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CVR Energy Reports 2018 Second Quarter Results

SUGAR LAND, Texas, July 25, 2018 (GLOBE NEWSWIRE) -- CVR Energy, Inc. (CVI) today announced net income of $51 million, or 59 cents per diluted share, on net sales of $1,914 million for the second quarter of 2018, compared to a net loss of $11 million, or 12 cents per diluted share, on net sales of $1,434 million for the 2017 second quarter. Second quarter 2018 adjusted EBITDA, a non-GAAP financial measure, was $103 million, compared to second quarter 2017 adjusted EBITDA of $38 million.

For the first six months of 2018, net income was $117 million, or $1.35 per diluted share, on net sales of $3,451 million, compared to net income of $12 million, or 13 cents per diluted share, on net sales of $2,942 million for the same period a year earlier. Adjusted EBITDA for the first six months of 2018 was $189 million, compared to adjusted EBITDA of $118 million for the first six months of 2017.

“CVR Refining reported solid results for the 2018 second quarter, attributable to a $4.88 increase in Group 3 crack spreads, low Renewable Identification Number (RIN) prices and wide crude oil differentials compared to the same period last year,” said Dave Lamp, CVR Energy’s Chief Executive Officer. “CVR Refining is off to a good start in the third quarter. While crack spreads have moderated in July, crude oil differentials are strong and RIN prices remain low.

“CVR Partners’ second quarter 2018 production levels were negatively impacted by both planned and unplanned downtime at the Coffeyville, Kansas, and East Dubuque, Illinois, fertilizer facilities,” Lamp said. “Looking toward the third quarter, the fall fill season for ammonia and UAN is now complete and market pricing was approximately 20 percent higher than last season.

“CVR Energy announced on May 29 that it had increased its dividend to $3 per share on an annual basis due to its strong balance sheet and operating performance. CVR Energy also announced the commencement of an exchange offer of CVR Energy shares for CVR Refining units. CVR Energy believes that, in light of recent tax reform, many unitholders would prefer to hold their investment in the form of common stock rather than partnership interests. In addition, the exchange offer will allow CVR Energy to increase its ownership in CVR Refining,” Lamp concluded.

Petroleum Business

The petroleum business, which is operated by CVR Refining and includes the Coffeyville and Wynnewood refineries, reported second quarter 2018 operating income of $117 million on net sales of $1,824 million, compared to an operating loss of $7 million on net sales of $1,338 million in the second quarter of 2017.

Refining margin adjusted for FIFO impact per combined total throughput, a non-GAAP financial measure, was $12.61 in the 2018 second quarter, compared to $7.21 during the same period in 2017. Direct operating expenses (exclusive of depreciation and amortization), excluding major scheduled turnaround expenses, per combined total throughput, for the 2018 second quarter were $4.76, compared to $4.13 in the second quarter of 2017.

Second quarter 2018 combined crude oil throughput was approximately 206,000 barrels per day (bpd), compared to approximately 214,000 bpd of combined crude oil throughput for the second quarter of 2017.

Nitrogen Fertilizers Business

The fertilizer business, which is operated by CVR Partners and includes the Coffeyville and East Dubuque fertilizer facilities, reported no operating income on net sales of $93 million for the second quarter of 2018, compared to operating income of $12 million on net sales of $98 million for the second quarter of 2017.

CVR Partners’ fertilizer facilities produced a combined 174,000 tons of ammonia during the second quarter of 2018, of which 66,000 net tons were available for sale while the rest was upgraded to other fertilizer products, including 241,000 tons of UAN. In the 2017 second quarter, the fertilizer facilities produced 215,000 tons of ammonia, of which 78,000 net tons were available for sale while the remainder was upgraded to other fertilizer products, including 314,000 tons of UAN.

Cash, Debt and Dividend

Consolidated cash and cash equivalents was $534 million at June 30, 2018. Consolidated total debt was $1,167 million at June 30, 2018. The company had no debt exclusive of CVR Refining’s and CVR Partners’ debt.

CVR Energy previously announced a second quarter 2018 cash dividend of 75 cents per share. The dividend, as declared by CVR Energy’s Board of Directors, will be paid on Aug. 13, 2018, to stockholders of record on Aug. 6, 2018. CVR Energy’s second quarter cash dividend brings the cumulative cash dividends paid or declared for the first six months of 2018 to $1.25 per share.

Today, CVR Refining announced a 2018 second quarter cash distribution of 66 cents per common unit. CVR Partners announced that it will not pay a cash distribution for the 2018 second quarter.

Second Quarter 2018 Earnings Conference Call

CVR Energy previously announced that it will host its second quarter 2018 Earnings Conference Call for analysts and investors on Thursday, July 26, at 3 p.m. Eastern. The Earnings Conference Call may also include discussion of company developments, forward-looking information and other material information about business and financial matters.

The Earnings Conference Call will be broadcast live over the Internet at http://edge.media-server.com/m6/p/wrsh27n7. For investors or analysts who want to participate during the call, the dial-in number is (877) 407-8291.

For those unable to listen live, the webcast will be archived and available for 14 days at http://edge.media-server.com/m6/p/wrsh27n7. A repeat of the conference call can be accessed by dialing (877) 660-6853, conference ID 13681419.

THIS NEWS RELEASE DOES NOT CONSTITUTE AN OFFER TO PURCHASE, OR A SOLICITATION OF AN OFFER TO SELL, ANY SECURITIES. THE EXCHANGE OFFER OF CVR REFINING COMMON UNITS FOR CVR ENERGY SHARES IS BEING MADE ONLY PURSUANT TO A PROSPECTUS/OFFER TO EXCHANGE, LETTER OF TRANSMITTAL AND RELATED MATERIALS DISTRIBUTED TO CVR REFINING’S UNITHOLDERS. CVR ENERGY FILED A REGISTRATION STATEMENT ON FORM S-4 AND A TENDER OFFER STATEMENT ON SCHEDULE TO WITH THE SEC, EACH OF WHICH INCLUDES THE PROSPECTUS/OFFER TO EXCHANGE. CVR REFINING’S UNITHOLDERS SHOULD READ THESE MATERIALS AND THE DOCUMENTS INCORPORATED BY REFERENCE THEREIN CAREFULLY AND IN THEIR ENTIRETY BEFORE MAKING ANY DECISION WITH RESPECT TO THE EXCHANGE OFFER. THESE MATERIALS CAN ALSO BE OBTAINED FREE OF CHARGE FROM THE SEC’S WEBSITE AT WWW.SEC.GOV.

Pursuant to the partnership agreement of CVR Refining, once the general partner and its affiliates own more than 80% of the common units of CVR Refining, the general partner and its affiliates will have the right, but not the obligation, to purchase all, but not less than all, of the common units of CVR Refining held by unaffiliated unitholders of CVR Refining at a price not less than their then-current market price, as calculated pursuant to the terms of the partnership agreement. Accordingly, the general partner and its affiliates will be entitled to exercise this call right after the consummation of the exchange offer. Pursuant to the partnership agreement, the general partner is not obligated to obtain a fairness opinion regarding the value of the common units of CVR Refining to be repurchased by it upon exercise of the call right. Pursuant to the partnership agreement, the general partner may use its own discretion, free of fiduciary duty restrictions, in determining whether to exercise the call right. The general partner and its affiliates (including CVR Energy and Icahn Enterprises L.P. and its affiliates) have no current plans to exercise the call right at this time or upon the consummation of the exchange offer. However, there can be no assurance that the general partner and its affiliates will not exercise the call right in the future.

Forward-Looking Statements
This news release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements concerning current estimates, expectations and projections about future results, performance, prospects, opportunities, plans, actions and events and other statements, concerns, or matters that are not historical facts are “forward-looking statements,” as that term is defined under the federal securities laws.  These forward-looking statements include, but are not limited to, statements regarding future: crude oil differentials; RINs, crude oil, feedstock and product prices; distributions of CVR Refining and CVR Partners; operating performance of CVR Refining and CVR Partners; reserves; ammonia and UAN pricing; third quarter performance including throughput, production, direct operating expenses, capital spending and depreciation; and other matters. You can generally identify forward-looking statements by our use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “explore,” “evaluate,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “seek,” “should,” or “will,” or the negative thereof or other variations thereon or comparable terminology. These forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. Investors are cautioned that various factors may affect these forward-looking statements, including (among others) price volatility of crude oil, other feedstocks and refined products; the ability of CVR Refining and CVR Partners to make cash distributions; potential operating hazards; costs of compliance with existing, or compliance with new, laws and regulations and potential liabilities arising therefrom; impacts of planting season on CVRR Partners; general economic and business conditions; and other risks. For additional discussion of risk factors which may affect our results, please see the risk factors and other disclosures included in our most recent Annual Report on Form 10-K, any subsequently filed Quarterly Reports on Form 10-Q and our other SEC filings. These risks also include the possibility that expected benefits from the exchange offer may not materialize as expected; that the exchange offer may not be timely completed, if at all; and that, prior to or after the completion of the exchange offer, the businesses of CVR Energy or CVR Refining may not perform as expected. These and other risks may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this news release are made only as of the date hereof. CVR Energy disclaims any intention or obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law.

About CVR Energy, Inc.
Headquartered in Sugar Land, Texas, CVR Energy is a diversified holding company primarily engaged in the petroleum refining and nitrogen fertilizer manufacturing industries through its holdings in two limited partnerships, CVR Refining, LP and CVR Partners, LP. CVR Energy subsidiaries serve as the general partner and own 66 percent of the common units of CVR Refining and 34 percent of the common units of CVR Partners.

For further information, please contact:

Investor Contact:
Jay Finks
CVR Energy, Inc.
(281) 207-3588
InvestorRelations@CVREnergy.com
           
Media Relations:
Brandee Stephens
CVR Energy, Inc.
(281) 207-3516
MediaRelations@CVREnergy.com

 
CVR Energy, Inc.
 
Financial and Operational Data (all information in this release is unaudited other than the balance sheet data as of December 31, 2017).
       
  Three Months Ended
 June 30,
  Six Months Ended
 June 30,
  2018   2017   2018   2017
  (in millions, except per share data)
Consolidated Statement of Operations Data:              
Net sales $ 1,914     $ 1,434     $ 3,451     $ 2,942  
Operating costs and expenses:              
Cost of materials and other 1,570     1,229     2,809     2,450  
Direct operating expenses(1) 141     124     273     262  
Depreciation and amortization 52     52     102     100  
Cost of sales 1,763     1,405     3,184     2,812  
Selling, general and administrative expenses(1) 32     25     55     55  
Depreciation and amortization 3     2     6     5  
Loss on asset disposals 5     1     5     1  
Operating income 111     1     201     69  
Interest expense, net (27 )   (27 )   (53 )   (54 )
Gain on derivatives, net 10         70     12  
Other income, net 2         3      
Income (loss) before income tax expense 96     (26 )   221     27  
Income tax expense (benefit) 17     (7 )   38     8  
Net income (loss) 79     (19 )   183     19  
Less: Net income (loss) attributable to noncontrolling interest 28     (8 )   66     7  
Net income (loss) attributable to CVR Energy stockholders $ 51     $ (11 )   $ 117     $ 12  
               
Basic and diluted earnings (loss) per share $ 0.59     $ (0.12 )   $ 1.35     $ 0.13  
Dividends declared per share $ 0.75     $ 0.50     $ 1.25     $ 1.00  
               
Adjusted EBITDA* $ 103     $ 38     $ 189     $ 118  
Adjusted net income (loss)* $ 45     $ (3 )   $ 79     $ 20  
Adjusted net income (loss) per diluted share* $ 0.52     $ (0.04 )   $ 0.91     $ 0.23  
               
Weighted-average common shares outstanding - basic and diluted
86.8     86.8     86.8     86.8  

______________________________
      * See “Use of Non-GAAP Financial Measures” below.

(1) Direct operating expenses and selling, general and administrative expenses for the three and six months ended June 30, 2018 and 2017 are shown exclusive of depreciation and amortization, which amounts are presented separately below direct operating expenses and selling, general and administrative expenses.

       
 

 
As of June 30, 2018   As of December 31, 2017
      (audited)
  (in millions)
Balance Sheet Data:      
Cash and cash equivalents $ 534   $ 482
Working capital 620   550
Total assets 3,850   3,807
Total debt, including current portion 1,167   1,166
Total CVR stockholders’ equity 883   919
       


  Three Months Ended
 June 30,
  Six Months Ended
 June 30,
  2018   2017   2018   2017
  (in millions)
Cash Flow Data:              
Net cash flow provided by (used in):              
Operating activities $ 204     $ 105     $ 229     $ 242  
Investing activities (21 )   (33 )   (41 )   (59 )
Financing activities (69 )   (45 )   (136 )   (89 )
Net increase in cash and cash equivalents $ 114     $ 27     $ 52     $ 94  
                               

Segment Information

Our operations are organized into two reportable segments, Petroleum and Nitrogen Fertilizer. Our operations that are not included in the Petroleum and Nitrogen Fertilizer segments are included in the Corporate and Other segment (along with elimination of intersegment transactions). The Petroleum segment is operated by CVR Refining, LP (“CVR Refining”), in which we own a majority interest as well as serve as the general partner. The Petroleum segment includes the operations of the Coffeyville, Kansas and Wynnewood, Oklahoma refineries along with the crude oil gathering and pipeline systems. Detailed operating results for the Petroleum segment for the three and six months ended June 30, 2018 are included in CVR Refining’s press release dated July 25, 2018. The Nitrogen Fertilizer segment is operated by CVR Partners, LP (“CVR Partners”), in which we own approximately 34% of the common units as of June 30, 2018 and serve as the general partner. The Nitrogen Fertilizer segment consists of nitrogen fertilizer manufacturing facilities located in Coffeyville, Kansas and East Dubuque, Illinois. Detailed operating results for the Nitrogen Fertilizer segment for the three and six months ended June 30, 2018 are included in CVR Partners’ press release dated July 25, 2018.

               
  Petroleum
(CVR Refining)
  Nitrogen Fertilizer 
(CVR Partners)
  Corporate 
and Other
  Consolidated
  (in millions)
Three Months Ended June 30, 2018              
Net sales $ 1,824     $ 93     $ (3 )   $ 1,914  
Cost of materials and other 1,553     19     (2 )   1,570  
Direct operating expenses 94     47         141  
Selling, general and administrative 22     7     3     32  
Depreciation and amortization 33     20     2     55  
Loss on asset disposals 5             5  
Operating income (loss) $ 117     $     $ (6 )   $ 111  
               
Capital expenditures $ 16     $ 6     $     $ 22  
                               


  Petroleum
(CVR Refining)
  Nitrogen Fertilizer 
(CVR Partners)
  Corporate
and Other
  Consolidated
  (in millions)
Six Months Ended June 30, 2018              
Net sales $ 3,282     $ 173     $ (4 )   $ 3,451  
Cost of materials and other 2,771     42     (4 )   2,809  
Direct operating expenses 187     86         273  
Selling, general and administrative 38     12     5     55  
Depreciation and amortization 67     37     4     108  
Loss on asset disposals 5             5  
Operating income (loss) $ 214     $ (4 )   $ (9 )   $ 201  
               
Capital expenditures $ 32     $ 9     $ 1     $ 42  
                               


  Petroleum
(CVR Refining)
  Nitrogen Fertilizer 
(CVR Partners)
  Corporate 
and Other
  Consolidated
  (in millions)
Three Months Ended June 30, 2017              
Net sales $ 1,338     $ 98     $ (2 )   $ 1,434  
Cost of materials and other 1,208     22     (2 )   1,229  
Direct operating expenses 86     38         124  
Selling, general and administrative 19     6     1     25  
Depreciation and amortization 32     20     2     54  
Loss on asset disposals         1     1  
Operating income (loss) $ (7 )   $ 12     $ (4 )   $ 1  
               
Capital expenditures $ 28     $ 4     $ 1     $ 33  
                               


  Petroleum
(CVR Refining)
  Nitrogen Fertilizer 
(CVR Partners)
  Corporate 
and Other
  Consolidated
  (in millions)
Six Months Ended June 30, 2017              
Net sales $ 2,762     $ 183     $ (3 )   $ 2,942  
Cost of materials and other 2,409     44     (3 )   2,450  
Direct operating expenses 188     74         262  
Selling, general and administrative 40     12     3     55  
Depreciation and amortization 66     35     4     105  
Loss on asset disposals         1     1  
Operating income (loss) $ 59     $ 18     $ (8 )   $ 69  
               
Capital expenditures $ 48     $ 9     $ 1     $ 58  
                               


  Petroleum
(CVR Refining)
  Nitrogen Fertilizer 
(CVR Partners)
  Corporate 
and Other
  Consolidated
  (in millions)
June 30, 2018              
Cash and cash equivalents $ 258     $ 28     $ 248     $ 534  
Total assets 2,366     1,200     284     3,850  
Total debt, including current portion 540     627         1,167  
               
December 31, 2017              
Cash and cash equivalents $ 174     $ 49     $ 259     $ 482  
Total assets 2,270     1,234     303     3,807  
Total debt, including current portion 541     626         1,166  
                       

Petroleum Segment Operating Data

The following tables set forth information about our consolidated Petroleum segment operated by CVR Refining, of which we own a majority interest and serve as the general partner, and the Coffeyville and Wynnewood refineries. Reconciliations of certain non-GAAP financial measures are provided under “Use of Non-GAAP Financial Measures” below. Additional discussion of operating results for the Petroleum segment for the three and six months ended June 30, 2018 are included in CVR Refining’s press release dated July 25, 2018.

       
  Three Months Ended
 June 30,
  Six Months Ended
 June 30,
  2018   2017   2018   2017
  (in millions)
Petroleum Segment Summary Financial Results:              
Net sales $ 1,824     $ 1,338     $ 3,282     $ 2,762  
Operating costs and expenses:              
Cost of materials and other 1,553     1,208     2,771     2,409  
Direct operating expenses(1) 94     86     187     188  
Depreciation and amortization 32     31     65     65  
Cost of sales 1,679     1,325     3,023     2,662  
Selling, general and administrative expenses(1) 22     19     38     40  
Depreciation and amortization 1     1     2     1  
Loss on asset disposals 5         5      
Operating income (loss) 117     (7 )   214     59  
Interest expense, net (11 )   (12 )   (22 )   (23 )
Gain on derivatives, net 10         70     12  
Other income, net 2         3      
Net income (loss) $ 118     $ (19 )   $ 265     $ 48  
               
Refining margin* $ 271     $ 130     $ 511     $ 353  
Refining margin adjusted for FIFO impact* $ 249     $ 146     $ 469     $ 369  
Adjusted Petroleum EBITDA* $ 147     $ 43     $ 273     $ 158  

______________________________
      * See “Use of Non-GAAP Financial Measures” below.

(1) Direct operating expense for the three and six months ended June 30, 2018 and 2017 are shown exclusive of depreciation and amortization, which amounts are presented separately below direct operating expenses. Selling, general and administrative expense for the three and six months ended June 30, 2018 and 2017 are shown exclusive of depreciation and amortization, which amounts are presented separately below selling, general and administrative expenses.

       
  Three Months Ended
 June 30,
  Six Months Ended
 June 30,
  2018   2017   2018   2017
  (dollars per barrel)
Petroleum Segment Key Operating Statistics:              
Per total throughput barrel:              
Gross profit $ 7.29     $ 0.60     $ 7.05     $ 2.43  
Refining margin* 13.71     6.45     13.93     8.64  
FIFO impact, (favorable) unfavorable (1.10 )   0.76     (1.15 )   0.39  
Refining margin adjusted for FIFO impact* 12.61     7.21     12.78     9.03  
Direct operating expenses and major turnaround expenses 4.76     4.27     5.10     4.62  
Direct operating expenses excluding major turnaround expenses 4.76     4.13     5.10     4.23  

______________________________
      * See “Use of Non-GAAP Financial Measures” below.

       
  Three Months Ended
 June 30,
  Six Months Ended
 June 30,
  2018   2017   2018   2017
Market Indicators (dollars per barrel):              
West Texas Intermediate (WTI) NYMEX $ 67.91     $ 48.15     $ 65.46     $ 49.95  
Crude Oil Differentials:              
WTI less WTS (light/medium sour) 8.50     1.06     5.05     1.24  
WTI less WCS (heavy sour) 18.02     10.00     21.81     11.88  
WTI less condensate 0.46     0.15     0.42     0.12  
Midland Cushing Differential 8.12     0.83     4.34     0.41  
NYMEX Crack Spreads:              
Gasoline 20.63     18.07     18.06     16.39  
Heating Oil 22.22     15.11     21.36     15.32  
NYMEX 2-1-1 Crack Spread 21.43     16.59     19.71     15.85  
PADD II Group 3 Basis:              
Gasoline (4.44 )   (3.95 )   (3.19 )   (2.96 )
Ultra Low Sulfur Diesel (0.05 )   (0.62 )   (0.33 )   (1.10 )
PADD II Group 3 Product Crack Spread:              
Gasoline 16.19     14.12     14.87     13.42  
Ultra Low Sulfur Diesel 22.17     14.49     21.03     14.23  
PADD II Group 3 2-1-1 19.18     14.30     17.95     13.82  
                       


       
  Three Months Ended
 June 30,
  Six Months Ended
 June 30,
  2018   2017   2018   2017
Petroleum Segment Summary     %       %       %       %
 Refining Throughput and Production Data (bpd):                              
Throughput:                              
Condensate 9,127     4.2     1,258     0.6     15,560     7.7     4,363     1.9  
Sweet 190,595     88.0     200,812     90.4     172,969     85.4     195,610     86.9  
Sour                              
Heavy sour 6,249     2.9     11,771     5.3     3,385     1.7     14,130     6.3  
Total crude oil throughput 205,971     95.1     213,841     96.3     191,914     94.8     214,103     95.1  
All other feedstocks and blendstocks 10,694     4.9     8,113     3.7     10,681     5.2     11,161     4.9  
Total throughput 216,665     100.0     221,954     100.0     202,595     100.0     225,264     100.0  
Production:                              
Gasoline 106,431     49.1     112,284     50.4     99,279     49.0     115,600     51.2  
Distillate 94,784     43.7     96,578     43.4     86,870     42.9     93,260     41.3  
Other (excluding internally produced fuel) 15,609     7.2     13,775     6.2     16,495     8.1     17,019     7.5  
Total refining production (excluding internally produced fuel) 216,824     100.0     222,637     100.0     202,644     100.0     225,879     100.0  
                                               


       
  Three Months Ended
 June 30,
  Six Months Ended
 June 30,
  2018   2017   2018   2017
      %       %       %       %
Coffeyville Refinery Throughput and Production Data (bpd):                              
Throughput:                              
Condensate 1,547     1.1     1,258     0.9     9,586     8.0     4,363     3.1  
Sweet 120,975     89.3     120,790     86.4     100,863     84.2     113,804     80.9  
Sour                              
Heavy sour 6,249     4.6     11,771     8.4     3,385     2.8     14,130     10.0  
Total crude oil throughput 128,771     95.0     133,819     95.7     113,834     95.0     132,297     94.0  
All other feedstocks and blendstocks 6,671     5.0     6,077     4.3     6,022     5.0     8,482     6.0  
Total throughput 135,442     100.0     139,896     100.0     119,856     100.0     140,779     100.0  
Production:                    ...