CVR Energy Inc. (CVI)

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CVR Energy, Inc. (CVI)

Q3 2012 Results Earnings Call

November 6, 2012 2:00 PM ET


Jay Finks - Director, Finance

Jack Lipinski - Chief Executive Officer

Susan Ball - Chief Financial Officer

Stan Riemann - Chief Operating Officer


Jeff Dietert - Simmons

Chi Chow - Macquarie

Stephen Carter - Credit Suisse



Greetings. And welcome to the CVR Energy Third Quarter 2012 Conference Call. At this time, all participants are in a listen-only mode. A 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, Inc. Thank you, Mr. Finks. You may begin.

Jay Finks

Thank you, Doug. Good afternoon. We very much appreciate you joining us this afternoon for our CVR Energy third quarter 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 third quarter results, let me remind you that this conference call may contain forward-looking statements, as that term is defined under federal securities law. 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 and expects and similar expressions are intended to identify forward-looking statements. You are 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 third quarter earnings release that we filed with the SEC yesterday after the close of the market.

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

Jack Lipinski

Thanks, Jay, and good afternoon, everyone. And thanks for joining our third quarter 2012 earnings call. First, I’ll provide a brief recap of third quarter financial results and then talk a little bit operations. Susan will then provide more detailed color around the numbers reported yesterday and I’ll finish with some closing remarks.

On October 1st we filed registration statement with the SEC that anticipates placing our refineries and logistic assets into a publicly traded MLP. As a result of this filing, I will not discuss any issues surrounding the potential IPO today.

For the third quarter consolidated net income was $208.9 million or $2.41 per diluted share. On an adjusted basis, adjusted net income was $260.2 million or $3 per fully diluted share.

Like prior quarters, we adjust net income for the impact of FIFO, major turnaround expenses, the impact of unrealized derivative gains or losses and other one-time expenses. Susan will discuss these more broadly in her remarks.

Some of the primary drivers of our earnings this quarter was strong crack spreads or access to price advantage crude, our high operating throughputs and strong business fundamentals that driver our fertilizer segment.

In the third quarter, the NYMEX 2-1-1 crack spread averaged $32.78 a barrel with the Brent-WTI spread averaging $17.58 over the quarter. During the quarter we realized strong product basis, the PADD II, Group 3 product basis was a positive $3.87 per barrel on a 2-1-1 basis, as compared to $1.25 in the same quarter last year.

As a result, our overall realized refining margin adjusted for FIFO remained strong at $33.44 a barrel, as compared to $27.55 a barrel in the same quarter last year.

Let me talk a little bit about our business segments and first I’ll start with petroleum. Within this segment, we ran more than 190,000 barrels a day of crude in the third quarter. We ran 124,600 barrels a day of Coffeyville and 67,900 barrels a day at Wynnewood.

On our last call I provided throughput estimates, I’m happy to report that actual crude throughput were above our both the high end of those estimates of Coffeyville and just below the top market Wynnewood.

Looking forward to the fourth quarter, we estimate total throughput for the plants be in the range of 148,000 to 158,000 barrels a day for the fourth quarter. We expect Coffeyville to run between 115,000 and 120,000 barrels a day and Wynnewood to run between 33,000 and 38,000 barrels a day. The decrease in Wynnewood crude throughput is a direct result of major turnaround that we’re in right now.

Like most mid-continent refiners, we continue to benefit from attractively priced crudes, our consumed crude oil discount to WTI for the third quarter was $4.38 a barrel, as compared to $2.57 a barrel in the third quarter 2011.

Our gathering system continues to perform admirably. We gathered 47,500 barrels a day in the quarter.

On August 31st we entered into an amended agreement with Vitol Incorporated. Vitol now provides crude oil intermediation for both plants that being Wynnewood and Coffeyville.

The term of this agreement was extended to December 31, 2014, and will automatically renew for successive on one-year terms unless either party provides notice of non-renewal at least a 180 days prior to expiration.

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