CVR Energy Inc. (CVI)

CVI 
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CVR Energy, Inc. (CVI)

Q4 2010 Earnings Conference Call

March 3, 2011, 11:00 am ET

Executives

Stirling Pack – VP of IR

Jack Lipinski – President and CEO

Ed Morgan – CFO

Stan Riemann – COO

Analysts

Kathryn O'Connor – Deutsche Bank

Joe Citarrella – Goldman Sachs

Ed Westlake [ph]

Presentation

Operator

Greetings and welcome to the CVR Energy fourth quarter and year-end 2010 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, Stirling Pack; Vice President of Investor Relations for CVR Energy. Thank you, Mr. Pack, you may begin.

Stirling Pack

Thank you, Rob. Good morning, everyone. We very much appreciate you being here for our call this morning. With me on the call today are Jack Lipinski; our Chief Executive Officer, Ed Morgan; our Chief Financial Officer and Stan Riemann; our Chief Operating Officer.

Prior to the discussion of our 2010 fourth quarter and year-end results, we are required to make the following Safe Harbor statement. In accordance with Federal Securities laws, the statements in this earnings call relating to matters that are not historical facts are forward-looking statements based on management’s belief and assumptions, using currently available information and expectations as of this date and are not guarantees of future performance and do involve certain risks and uncertainties, including those noted in our filings with the Securities & Exchange Commission.

This presentation 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 2010 fourth quarter and year-end earnings release that we filed with the SEC yesterday after the close of the market.

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

Jack Lipinski

Thank you Stirling, good morning all and thanks for joining us. You have seen the results we released last night; we ended the year pleased with our results. I will first give my remarks and provide insight into the numbers you saw in the release, then Ed will report on our financials and afterwards I will give you my view on the current operating environment and after that we will take your questions.

In the fourth quarter, we filed an S-1 that addresses our plans with respect to our fertilizer business. In accordance with SEC rules, the Company cannot comment on matters discussed in the S-1, we will do so when appropriate, with that let me get started here. Overall, we are satisfied with the way the year turned out especially given where it began. If you recall, last February compared to Group 3 2-1-1 Crack Spread had fallen to its lowest $4 a barrel, during the year margins improved and ended with the group packages over $12.

For the year, we reported net income of $14.3 million or $0.16 per fully diluted share. On an adjusted basis, net income was $39.8 million or $0.45 per diluted share and that's on revenue of just over $4 million. For the fourth quarter, we had net income of $2.3 million or$0.03 per diluted share.

The adjusted fourth quarter results are a net income of $12.2 million or $0.14 per diluted share. Ed will walk you through the details on how we compute adjusted net income. We think the best measure of our success during the year was $163 million of net cash flow generated from operations. We began the year with $37 million in cash and ended it with $200 million.

Even after voluntarily paying down our debt on our first lean [ph] bonds, Ed will again speak to our cash and overall liquidity position during his remarks. Year-over-year refining operations continue to improve, during 2010 we set a new annual throughput record of 113,600 barrels a day, total throughput including all food stocks averaged 123,700 barrels a day.

In the fourth quarter, average crude throughput was 116,300 barrels a day and our total throughput exceeded 130,000 barrels per day. Operating income for the year from our petroleum segment was $104.6 million. In the fourth quarter; we recorded operating income from refining of $60.4 million. As noted it in our previous SEC filings, we had a non-anticipated outage on our SEC on December 29.

The end of return to full service on January 26, the net effect of this outage on lost production will show up on our first quarter results. We estimate that approximately 1.8 million barrels of crude processing will be lost in the first quarter. Despite this outage, we continue to generate positive refining income in the month of January. Our crude gathering business continues to perform well; during the year we gathered an average of 31,060 barrels a day of crude, which is a new annual record.

These fairly priced gathered barrels are an important part of our oil refinery economics and we continue to move forward on a number of opportunities to expand this business. As you know from prior calls; we have 25,000 barrels a day at capacity on the recently completed Keystone Pipeline Cushing expansion. Our first delivery was made on March 1.

This supplements to 12,000 barrels a day capacity we have on the spearhead system. We now have the ability to shift all our heavy Canadian crude needs on contracted pipelines base. This also allows us optionality to ship other grades as well. Contango for 2010 averaged $0.87 per barrel per month with a high of $4.59 and a low of $0.12; it ended the year with $0.84 per barrel a month.

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