CVR Energy Inc. (CVI)

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CVR Energy, Inc. (CVI)

Q4 2012 Earnings Call

March 12, 2013 4:30 PM ET


Jay Finks – Director, Finance

John Lipinski – CEO and President

Susan Ball – CFO and Treasurer


Arjun Murti – Goldman Sachs

Chi Chow – Macquarie Capital Markets

Gregg Brody – JPMorgan



Greetings and welcome to the CVR Energy Fourth Quarter 2012 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

(Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Jay Finks, Director of Finance of CVR Energy. Thank you, sir. Please begin.

Jay Finks

Thanks, Dan. Good afternoon, everyone. We very much appreciate you joining us this afternoon for our CVR Energy year end 2012 earnings call. With me are Jack Lipinski, our Chief Executive Officer; Susan Ball, our Chief Financial Officer; and Stan Riemann, our Chief Operating Officer.

Prior to discussing our 2012 fourth quarter and full year results, let me remind you that this conference call may contain forward-looking statements, as that term is defined under federal securities laws. For this purpose, any statements made during this call that are not statements of historical facts may be deemed to be forward-looking statements.

Without limiting the foregoing, the words believes, anticipates, plans, expects and similar expressions are identified – are intended to identify forward-looking statements. You’re cautioned that these statements may be affected by important factors set forth in our filings with the Securities and Exchange Commission and in our latest earnings release. As a result, actual operations or results may differ materially from the results discussed in the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

This call also includes various non-GAAP financial measures. The disclosures related to such non-GAAP measures, including reconciliation to the most directly comparable GAAP financial measures are included in our 2012 fourth quarter and full year earnings release that we filed with the SEC this morning prior to the open of the market.

With that said, I’ll turn the call over to Jack Lipinski, our Chief Executive Officer. Jack?

John Lipinski

Jay, thank you, and good afternoon, everyone and thanks for joining our earnings call. Hopefully, you’ve had the opportunity to hear the UAN CVR Partners fertilizer call back on the 28th, hosted by Byron Kelley, and our earlier call this morning on CVR Refining, LP. For those of you that have heard those two calls, right now you’re going to hear a lot of the same information we both spoke about, but here we’re discussing CVR Energy now, the holding company that owns both LPs.

I’ll provide a brief recap of the fourth quarter and full year results and some operational impacts. Susan Ball, our Chief Financial Officer, will then provide more detail around the numbers reported this morning, and I’ll finish with some closing remarks.

Before I get to the results, I’d like to talk about a few key milestones we’ve achieved. In October, we issued $500 million of new notes to refinance our first lien senior secured notes, which were fully regained in November. In December, we entered into an amended and restated ABL credit facility for the company. On January 23, we closed on our initial public offering of CVR Refining, LP. This was the largest IPO of the master limited partnership to date.

I’d like to take the time to thank all our employees for the countless hours and tremendous effort they spent and – in the months prior to our IPO. In connection with the closing of CVR Refining, LP IPO, we regained our second lien senior secured notes.

I’m proud to report strong earnings in both the quarter and the full year. For the fourth quarter, consolidated adjusted net income was $103.8 million or $1.20 per diluted share as compared to $29.5 million or $0.34 per diluted share in the fourth quarter of 2011. For the full year 2012, our adjusted net income was $660.1 million or $7.55 per diluted share as compared to $345.7 million or $3.94 diluted share during the full year 2011. Like prior quarters, we adjust net income for the impacts of FIFO, major turnaround expenses, the impact of unrealized derivative gains or losses and other one-time expenses. I’ll let Susan more broadly discuss the adjustments to net income in her remarks.

Let me talk to each of our business segments. First, the petroleum business. In the fourth quarter 2012, the NYMEX 2-1-1 crack spread averaged $33.32 a barrel with the Brent WTI differential averaging $22.09 over the quarter. For the year, the NYMEX 2-1-1 crack spread averaged $30.75 per barrel with the Brent WTI spread averaging $17.35.

In the fourth quarter, we recognized weaker seasonal product basis in our area. Our area is Group 3 of PADD II. The product basis in the group was negative $1.13 per barrel as compared to a positive $0.05 per barrel in the same quarter last year. Our overall realized refining margin adjusted for FIFO was $25.93 per barrel as compared to $11.05 in the same quarter last year. We completed a major scheduled turnaround at our Wynnewood refinery in December. During the quarter, our turnaround expenses totaled approximately $89 million. The total cost of the turnaround at Wynnewood was $102.5 million.

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