Greetings, and welcome to the CVR Energy Fourth Quarter and Year-End 2011 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ed Morgan, Executive Vice President, Investor Relations. Thank you, Mr. Morgan, you may begin.

Thank you, Lethania. And hello, everyone. We really much appreciate you joining us for our CVR Energy conference call today. With me today are Jack Lipinski, our Chief Executive Officer; Frank Pici, our Chief Financial Officer; and Stan Riemann, the Chief Operating Officer. Although we will not reference slides during our call this afternoon, there are slides filed with the SEC this morning, which summarize our quarterly and year-end results. These slides, along with other financial disclosures reconciliations for non-GAAP financial measures, should assist in analyzing our results and can also be found at our website at cvrenergy.com under the Investor Relations tab. Prior to discussing our 2011 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 and 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 fourth quarter and year-end earnings release that we filed with the SEC yesterday after the close of the market. With that said, I'll turn the call over to Jack Lipinski, our Chief Executive Officer. Jack?

Thank you, Ed. Good afternoon, everyone. Before we start today, let me introduce Frank Pici, our Chief Financial Officer, who joined us just after the first of the year. Frank brings a wealth of experience to CVR Energy. He has 30 years of service in the energy industry and a deep understanding of master limited partnerships like CVR Partners. Also, Ed Morgan has become Executive Vice President of Investor Relations providing a greater focus on investment and shareholder matters. This afternoon, Frank and I will provide color around our quarterly and annual numbers. After Frank delivers his report, I'll update you on our progress with the Wynnewood acquisition and the partial turnaround just beginning at Coffeyville. As you saw in our filings and news release, we had a good fourth quarter and a very good year, posting our best-ever annual financial results. We reported a consolidated adjusted EBITDA of $692 million for the year, which is nearly what was paid for the entire company back in 2005. And that was despite a 37-day turnaround in the fourth quarter. Even with the turnaround, we had $80 million of consolidated adjusted EBITDA. Frank will walk you through the specifics of both, but I'd like to touch on a few of the many factors that led to these record results. Our location in the Mid-continent leaves us well-positioned to take advantage of the dramatically increasing production of onshore North American crude. Our focus on growing our crude gathering and storages logistics business continues to provide us with crudes at discounted costs. And our intense focus on continual operational improvement and future growth lets us enhance our assets on a daily basis. One thing I want to address that affected some estimates of our fourth quarter performance were the declining crack spreads across the…

Thanks, Jack. Good afternoon, everyone. I'll try to walk you through a few of the specifics from the quarter. I think Jack mentioned a few minutes ago the improvements in EBITDA quarter-over-quarter and year-to-year and when you look at the quarter EBITDA, adjusted EBITDA, really the driver for that was although our petroleum segment was kind of rather flat given the refining margins didn't really move much for us year-over-year, but the fertilizer segment did improve quite substantially quarter-to-quarter and that was really because of the production mix more to UAN and a great improvement in UAN prices year-over-year where they almost doubled from the same quarter last year. When you look at the full year adjusted EBITDA, you really see the impact of the improved refining margins year-over-year. We report for this year about a little over $21 per barrel of crude oil throughput of margin versus $8.07 a year before. So that's 160-plus percent improvement and that's on fairly flat, specs slightly down crude oil throughput launch volumes but the refining margin were up quite a bit. So those are really the drivers year-over-year, quarter-over-quarter for the adjusted EBITDA increase that you see and Jack has mentioned. With respect to our earnings, you look at our earnings, we've got a bridge that we built to go from our net income to our adjusted earnings per share and some of the things that we normalized to get to those numbers. We adjust out our FIFO impact, which was about $0.24 a share. We take out our turnaround expenses, which were about $0.37 a share. We always backout our hedging gains, unrealized hedging gains, that's $0.64 a share. And our Wynnewood acquisition, we had some acquisition-related costs about $0.06 and some share-based compensation charges we normalized after our noncash of…

Thank you, Frank. Before I move on to your questions, let me give you a bit of an update of what we're seeing is in the first quarter so far. As I mentioned a little earlier, product inventories in the Magellan Pipeline System are at very high levels, or at least began the year at very high levels. As a result, Coffeyville product shipments were restrict again to that system, which would result in reduced crude runs in January and February. Product realizations because of the high inventory overhang were also impacted, and you see that in Mid-continent cracks. For those of you who closely follow the Mid-con, this is not a once-in-a-lifetime event. It actually occurs every 2 or 3 years. And as bad as we think it has been in the group, the other part of pad 2 which is Chicago actually seems to be suffering worse than we are. As demand grows going into spring, inventory levels on the Magellan System will improve as they always do. When spring comes, the farmers get out into the fields and the ag sector comes back to life, which tends to empty the Magellan system as we go forward. Like most Mid-continent refiners, we continue to benefit from the disconnect between Brent and WTI crudes. That spread narrowed in the fourth quarter and early this year. The Brent-WTI spread has widened considerably and today stands at over $15 a barrel. Additionally, we've seen crack spreads rebound to over $29 a barrel from just over $18 a barrel early January. And as Frank mentioned, we are opportunistically picking off hedges as we see fit to put some backstop against our future earnings. During the fourth quarter, heavy crude differentials tightened. Those dips have widened very wide and are now in the…

[Operator Instructions] Our first question comes from Jeff Dietert with Simmons.

It's Jeff Dietert. I was hoping you could talk about Wynnewood operations a little bit. You've been operating the plant for a couple of months, and what do you see as far as opportunities there, ability to improve feedstock yields, just the operations of the plant?

Well, one of the reasons we acquired the Wynnewood facility was its proximity to Coffeyville. But also, it was a way to parlay our logistic assets in Cushing to improve the operation, not only the operation but the economics of Wynnewood. Refineries are just basically a mechanism to turn the lowest price crude oil into finished product that you can sell. With our pipeline space coming down from Canada, the logistics assets we have, the gathering and everything else, we're making serious inroads into the cost of crude, delivered crude for Wynnewood. Historically, that plant delivered crude somewhere between $0.30 and $0.50, a barrel above WTI. They would buy WTI. They buy some WTS, but after delivery costs, they would deliver in above that. We are already below WTI on that and expect to see significant improvements, particularly with our ability to access midland WTI, Bakken and just a list of other crudes plus our own gathered crudes. Again, gathering in the areas is going to very, very significant. So the very first thing is we would expect a significant -- over time significant drop in the acquisition cost in crude which dollar per dollar goes to our EBITDA. On the operations side, the Gary-Williams Energy company was not as technically focused. The company was a private company, not as technically focused as we are at CVR Energy. Today, we took a cat cracker down. We did some improvements, actually did a fair bit of work that would have otherwise be executed in the fall turnaround and came back and just increased unit capacity by 3% or 4% and increase liquid yield. By just adjusting the way we operate certain units, we significantly improved our jet fuel yield. Basically, we're making about 1,000 barrels a day more jet fuel than the plant did before and that's at the expense of gasoline, so you're taking one of the highest value products, making our highest value product from one of our lower value product. So we're pretty excited about what we see. Ultimately, the synergies at Coffeyville and Wynnewood will become apparent. There are cycles. Our Coker is large enough at Coffeyville. So that if the asphalt market were to get really soft, we could take those barrels and coke them at Coffeyville. And you remember, we make somewhere like 8% or 9% asphalt out of -- at Wynnewood. We've been able to increase crude rates. Again, I've mentioned this before, we're running at 70,000 barrels a day. It's our goal to take the same team of technical people and operators and use the same work ethics, the same intelligence, the same engineering principles that we took Coffeyville which was actually a bankrupt company back in 2004 and turned it into one of the premiere refineries in the Mid-continent. We're going to do the same thing with Wynnewood.

Second question on your gathering system. It looked like a step function improvement in volume and the barrels that you're moving on the gathering system, it's consistent with what we're seeing across the onshore with conventional development. What do you think the potential is for growing that gathering business?

Our goal is 20% a year until we believe we reached something like 60,000 or 70,000 barrels a day. We're continuing to look at other logistics assets, being Cushing-centric. But the Mississippian is on our backyard. I mean, it's a truck drive away. You start looking at the opportunities that we have and it's a very low capital business. We do not have to apply very much capital and make the system work. So for us, we think, probably the first time we're going to talk about it. But on average from the highest price to lowest price crudes, we net back somewhere around $2 a barrel for every barrel we gather. It's higher in certain parts and lower in other parts, and it depends on quality. But we fund the entire gathering business from the basic P-plus discount that we buy the crude at. Typical discounts are somewhere $10, $11 adjusted for quality. And out of that, we take all of our expenses, capital expenses, personnel expenses, operating expenses. And the difference shows up as crude discount at Coffeyville, and now Wynnewood.

Our next question comes from Chi Chow with Macquarie Bank.

Frank, you mentioned on your comments that there was a $11 million realized gain in the fourth quarter. Where is that showing up? I think you mentioned that it wasn't showing up in your gross margins.

It's actually part of our income statement. It shows up in our hedging gains and losses line. So it's part of that line, Chi.

Okay. You're not allocating that and you won't going forward, I'm assuming...

No, no. I just want to say -- give you some color on the impact of the hedging program.

Okay. Great. And Jack, regarding your corporate structure, I know you showed a slide on this a few weeks back. But could you go over again the hurdles to any tax-free separation on your interest in UAN?

All right. Well, again, I will refer you to the documents we've publicly filed. But the tax rate -- in order to spend our units, which sit inside in MLP, you would first have to put it into a C corp, get an IRS letter and then send it out to the shareholders. So you are effectively paying full tax either way. What our intent here to start selling down some of our portion, gets to the same results without the brain damage of going through a and the risk of trying to separate the companies. There's no guarantee that it will work properly. And then if you do spin it into a company, what would that company trade at. There's a -- it would be a one-of-a-kind. There are C corps that hold MLPs, that hold GPs that have IDRs. You will recall that our GP has no IDRs. So the risk is that you have an entity for which there are no comps, and you have no idea where it will trade.

Okay. Now that you've started or announced that you intend to sell down your interest in UAN, is there a target level of ownership that you're comfortable with holding to gain the efficiency on valuation?

The board hasn't addressed that. We're doing it step-by-step. We decided that this was the proper thing to do to allocate some of that capital back as a special dividend, significant special dividend, and then we'll look at it over time. But again, there's couple of ways of looking at it. You know what the refining EBITDA is, and you know what the fertilizer EBITDA is. And then you look at the relative valuations, the market caps of each company. And you would just simply say that the biggest contribution to our corporate earnings come from refining, and taking some of the UAN off the table is beneficial for everybody.

[Operator Instructions] Our next question comes from Ed Westlake with Crédit Suisse.

Just a quick question on capital. Obviously, this year is a big year for refining capital, partly turnaround, just off your slides, let's call it nondiscretionary if we just look at that, goes from $18 million in 2010 to $50 million in 2011 to $140 million in 2012. And your total capital in 2012 is $166 million for the refining side. As you look beyond 2012, I mean, where do you think the sort of the run rate for refining capital should be?

The sustaining capital will probably run in the range of, pick a number, $40 million or so for Coffeyville, $40 million to $45 million, probably somewhere in the range of $25 million to $30 million. That's just normal sustaining capital. Don't forget one of the big things we're doing this year is the UAN. Since everything is consolidated, the UAN expansion is in there as money we're spending this year.

Yes. And so as you think forward, I mean, maybe a second question around the logistics business. I mean, once that gets scale, I just did some math in my head, if you do $2 on 70,000, maybe you're getting up to about $50 million. Is that the sort of level you need before you think about doing an MLP for the logistics business?

No. We have other opportunities. We own several hundred miles of our own pipelines. We have tanks, we have the Cushing tank farm. All of that can roll into an MLP.

And so potentially, that could be done sooner rather than later?

Once we -- and again, this is somewhat of our bankers friends telling us that the proper level should be about $50 million of EBITDA to have a substantial MLP that could have drop-downs. Our Cushing tank farm, you could do the math, the lease rates on storage today are running in the mid-30s, mid to high $0.30 per barrel per month range. The Cushing tank farm alone would add about $4 million a year of revenue, that's per million barrels. Our Cushing tank farm could sustain a tank -- a size of up to 6 million barrels. I'm not saying we're going to build that out, but certainly there's good economics in that and we have, again, pipes and storage all through our existing system right now that many companies will drop into an MLP. And the valuable part of that is that the company trades at a 4 to 5 multiple. If you have a logistics MLP based on a fee-based business, that multiple is not 4 or 5 but it's 14 to 16, and the value accretion from taking $50 million of EBITDA is several dollars a share.

And then I guess the other area is just then following on from your capital guidance, the free cash that you're going to be throwing off. So you received a contribution from selling down some UAN that you'd be set -- give back to shareholders as a special, but you're also going to be paying, well, increasing cash and reducing net debt over time from organic cash flow. So can you just talk us through about what sort of level perhaps of net debt to cap or some kind of metric you'd want to get to before you start increasing your shareholder distributions from organic cash flow?

Well, they can go on concurrently. The board has, by its actions, has indicated that it intends to allocate capital in the form of dividends, either regular or special. We, at the refining side of the business, round numbers at $675 million of debt. I'm not talking net debt, I'm just talking total debt. A somewhat bulletproof balance sheet for a refiner, even in a turn down situation for us, $400 million, $450 million of debt. And if we see the tailwinds that we see right now between the sell down of some of the UAN and the increased cash flow, we think we can accomplish both concurrently.

Our next question comes from Sam Margolin with Global Hunter.

You mentioned about $180 million of cash locked up in inventories for the turnaround. Should we expect that to be released, especially immediately after Coffeyville is turned around at the end of March or...

Yes, less the initial tank fill for Cushing.

Okay. Oh yes, that's the other thing. Is there -- it seems as though if you started purchasing these barrels for Cushing storage from northern basins around a month ago or in the early part of the year, they're going to come in at some pretty heavy discounts to the spot market. Is that mark-to-market in the second half of the year, or you're just going to run those barrels through operations? Or is that something you could actually augment sort of income or cash flow with?

Well these will -- and like we do with the other storage we lease in Cushing, it's simply a flow-through. It's a wide spot in the line, so these barrels will eventually find their way into the refineries. So we will reap the benefit of those lower priced barrels as we run them through our system.

Okay. And my last question is sort of -- is more theoretical. You mentioned the $50 million threshold for an MLP subsidiary on the midstream side. Given the uniqueness of the UAN asset, is there any way or do you think there's any appetite or any inkling in your own personal philosophy to maybe add some energy midstream assets into that structure and make it a type of diversified MLP? Or is that going to stay without having to form another company? Or is that going to be completely separate from...

Well actually I'm jumping over. I am the Executive Chairman of CVR Partners, but I'm trying to stay on CVR Energy. The initial intent of the IPO was to form a predominantly fertilizer-centric MLP. Those who wanted to partake in the fertilizer space could do so. And yes, if we are absolute failures at building our gathering system, which I don't expect us to be and logistics system by the way, we could always drop down those assets a certain degree into the fertilizer MLP. You have to -- but the relative differences in trading values between a full commodity variable distribution MLP and a fixed fee pipeline logistics MLP are pretty wide. So the best value for us would be to put it into one of those fixed fee MLPs.

Yes, the question was just related. It would just, I think, purely be a way to front run that $50 million threshold in case the timing of it seemed too far out but...

Yes. No, absolutely. But we're looking -- we see an awful lot of opportunity. It's not the easiest thing to just start a gathering business. There's a lot of back office, there's a lot of little bits and pieces you need to do. And if you remember, we started this business at 7,000 barrels a day back in 2005. And since then, it's been the focus of our growth simply because it's a way, at least initially, was a way of getting WTI delivered to the refinery at a price lower than WTI.

Okay. Actually one more for Frank. There's a -- with all the one-time items in the quarter, do you have a cash tax number?

I don't have one off hand. I can get it for you. I'll get it for you after the call.

And by the way, for everybody on the call, you will notice this year, or at least for the fourth quarter, we did not separate out Wynnewood and Coffeyville to any large degree. That is not our plan going forward. It was just because we closed this transaction late in the year, and it wouldn't have been that significant for the fourth quarter. But going forward, we will separate out operations and metrics for both facilities.

Thank you. Ladies and gentlemen, we have come to the end of the time allotted for our Q&A session today. I would like to turn the call back over to management for closing comments.

Thanks, Lethania. We want to thank everybody or each of you for joining our call today, and we also look forward to soon sharing with you our first quarter results in the early half of May. Have a good afternoon.

Thank you, everyone.

You may disconnect your lines at this time, and thank you for your participation.