Earnings Call Insights: Par Pacific Holdings, Inc. (PARR) Q2 2025
Management View
- President and CEO William Monteleone reported "Second quarter adjusted EBITDA was $138 million and adjusted net income was $1.54 per share. Strong operations, combined with improving market conditions enabled us to generate solid profits during the quarter."
- Monteleone highlighted a "quarterly operational throughput record in Hawaii" and noted, "Quarterly, same-store fuel and in-store revenue increased by 1.8% and 3% compared to the second quarter of 2024."
- Monteleone announced, "We're also pleased to announce the joint venture with Mitsubishi and ENEOS Corporation. Together, Mitsubishi and ENEOS will contribute $100 million for a 36.5% equity interest in the joint venture, while Par Pacific will remain with a 63.5% controlling interest." He added, "Following regulatory clearance, we expect to receive the $100 million investment, which will cover the cost of our project."
- The company repurchased $28 million of stock at a weighted average price of $17.63, bringing the year-to-date share count down by nearly 8%.
- CFO Shawn Flores stated, "Second quarter adjusted EBITDA and adjusted earnings were $138 million and $78 million or $1.54 per share. Our Refining segment reported adjusted EBITDA of $108 million in the second quarter compared to a loss of $14 million in the first quarter."
Outlook
- Monteleone stated, "Looking forward, strong market conditions, reduced capital spending requirements and the expected receipt of JV proceeds position us to drive strong cash generation."
- Flores provided third quarter throughput guidance: "We expect Hawaii throughput between 78,000 and 81,000 barrels per day...Washington throughput to be between 39,000 and 41,000 barrels per day, Wyoming between 18,000 and 19,000 and Montana between 54,000 and 56,000, resulting in a system-wide throughput between 190,000 and 205,000 barrels per day."
- The SAF project remains "scheduled for start-up in the second half of the year," with Monteleone indicating, "I wouldn't expect to start to see financial contributions from the JV until really the first quarter of '26."
Financial Results
- Flores reported, "Second quarter adjusted EBITDA and adjusted earnings were $138 million and $78 million or $1.54 per share."
- The Hawaii segment achieved a margin capture of 119%, with Flores explaining, "Excluding these items, margin capture was 125%, reflecting favorable yield and reduced product imports, driven by record quarterly throughput rates."
- Retail segment adjusted EBITDA was $23 million, up from $19 million in the first quarter, attributed to "higher fuel margins, same-store sales growth and lower operating costs."
- The company achieved a $24 million reduction in year-to-date consolidated operating expenses compared to the prior year period, excluding Wyoming repair costs.
- Ending liquidity was reported at $647 million, an increase of 23% during the quarter.
Q&A
- Matthew Blair, TPH: Questioned drivers of Hawaii's strong capture rates. Flores answered, "Our reported capture was 119%. Excluding the nonrecurring events of the price lag and crack hedging, was 125%...primarily driven by elevated clean product freight rates...as you see throughput rates move higher, closer to nameplate capacity, our yield expense improves materially."
- Blair asked about the SAF JV's benefits and timeline. Monteleone responded, "I think the key thing that's driven really the partnership here is the...relative attractive elements of our project...we see our SAF project is very attractive relative to the industry." On timing: "We're targeting second half of this year...I wouldn't expect to start to see financial contributions from the JV until really the first quarter of '26."
- Ryan Todd, Piper Sandler: Inquired about Rockies performance and cash use. Flores described, "What drove capture closer to the 110% was our ability to draw down diesel and gasoline inventories." Monteleone on capital allocation: "When we're in an excess capital position...we get the chance to repurchase our shares below intrinsic value...a nimble approach is critical."
- Neil Mehta, Goldman Sachs: Asked about small refinery exemptions. Monteleone replied, "Our expectation is that the EPA will...go through a rigorous...process to assess each plant." Flores added, "Any retroactive receipt of a small refinery exemption would be sort of direct cash proceeds."
- Mehta sought views on Singapore market risk. Monteleone explained, "The overall Chinese refining fleet remains focused on meeting internal demand...we don't see a major shift there."
- Michael Laupheimer, TD Cowen: Probed niche market durability and excess cash. Monteleone said, "Our July combined index is about $13...the distillate market being strong." Flores confirmed minimum liquidity target is $250 million to $300 million. Monteleone noted focus on internal and bolt-on growth over larger M&A.
- Manav Gupta, UBS: Asked about global quality discounts and WCS market. Monteleone stated, "The future incremental supply looks like it should...expand the heavy light dip as we head into the winter. Not seeing signs of that in the prompt market...continue to see A&S and grades like that trade at some pretty elevated premiums to Brent."
Sentiment Analysis
- Analysts maintained a neutral to slightly positive tone, with focus on project execution, margin sustainability, and capital allocation. Questions centered on operational drivers, market outlook, and cash deployment, often seeking clarification or detail.
- Management's tone was confident and constructive, with Monteleone emphasizing operational achievements, strategic partnerships, and flexibility in capital allocation. Statements such as "we are pleased with the team's performance" and "very pleased with this [JV], and I think it helps shine a light on the attractive elements of the project" reflected positive sentiment. Flores displayed confidence in guidance and cost control.
- Compared to the previous quarter, both analysts and management displayed increased confidence, with fewer questions on operational setbacks and more on growth opportunities and capital returns.
Quarter-over-Quarter Comparison
- Guidance language shifted from cautious optimism in Q1, amid operational disruptions, to a more constructive outlook in Q2, emphasizing improved market conditions and capital flexibility.
- Strategic focus evolved from completing major turnarounds to enhancing profitability and executing growth projects, notably the SAF joint venture.
- Analysts' focus moved from concerns about operational recovery and maintenance completion in Q1 to questions on market positioning, sustained margins, and capital allocation in Q2.
- Key metrics showed substantial improvement: adjusted EBITDA increased from $10 million in Q1 to $138 million in Q2, and adjusted net income swung from a loss of ($0.94) per share to $1.54 per share.
- Management's confidence was elevated, with an emphasis on record throughput, margin improvements, and ongoing cost reductions. Analysts shifted from probing for risk mitigation to exploring upside potential.
Risks and Concerns
- Management referenced "policy uncertainty" regarding renewables but expressed confidence in project flexibility and cost structure.
- Small refinery exemption timing and impact remain uncertain, with Monteleone stating, "I won't even hazard a guess, Neil. I think this is highly politicized...there would just be speculation to try and say that we know what the time line is."
- Weather-driven crude delivery delays in Hawaii could affect third quarter throughput, though downstream units remain fully utilized.
- Analysts raised questions about the durability of niche market margins, global supply risks, and the impact of regulatory developments on cash flow.
Final Takeaway
Par Pacific's second quarter was marked by record operational throughput, significant margin capture, and strengthened financial performance, supported by a new $100 million joint venture for renewable fuels. Management expressed confidence in sustaining operational gains and capitalizing on market opportunities, while maintaining a flexible and opportunistic approach to capital allocation. The outlook for the second half of the year includes lower capital spending, robust liquidity, and the anticipated start-up of the SAF project, positioning the company for continued cash generation and strategic growth.
Read the full Earnings Call Transcript
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