Jay Finks - Vice President of Finance and Treasurer Dave Lamp - Chief Executive Officer Tracy Jackson - Chief Financial Officer

Greetings, and welcome to the CVR Energy Inc., Third Quarter 2018 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, Vice President of Finance and Treasurer. Thank you. You may begin.

Thank you, Michelle. Good afternoon, everyone. We very much appreciate you joining us this afternoon for our CVR Energy third quarter 2018 earnings call. With me today are Dave Lamp, our Chief Executive Officer; Tracy Jackson, our Chief Financial Officer and other members of management. Prior to discussing our third quarter 2018 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 outlook, believes, anticipates, plans, 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, except to the extent required by law. 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 2018 third quarter earnings release that we filed with the SEC yesterday after close of the market. With that said, I will turn the call over to Dave, our Chief Executive Officer. Dave?

Thanks, Jay. Good afternoon, everyone and thank you for joining our earnings call. Hopefully, you had an opportunity to listen to the CVR Partners and CVR Refining's earnings calls earlier today. We reported CVR Energy's third quarter 2018 consolidated net income was $90 million or $0.94 per diluted share as compared to net income of $22 million, or $0.26 per diluted share in the third quarter last year. We also announced a quarterly cash dividend of $0.75 per share, which will be paid on November 12th to stockholders of record on November 5th. Now, let's speak to some of the third quarter highlights from each of the business segments. CVR Refining's third quarter 2018 adjusted EBITDA was $221 million as compared to $139 million a year ago. CVR Refining also declared a third quarter distribution of $0.90 per common unit. In addition, we completed the exchange offer of the CVR Energy shares for CVR Refining units. CVR Energy now owns approximately 81% of the units of CVR Refining LP. Operationally, both plants ran well and there was minimal loss opportunity. The combined total throughput for the third quarter of '18 was approximately 219,000 barrels per day as compared to 214,000 in the third quarter of '17. Now, turning to the fertilizers business. CVR Partners announced the third quarter 2018 adjusted EBITDA of $19 million as compared to $5 million in the third quarter of 2017. During the third quarter, CVR Partners had strong production results at both facilities with little downtime. The gasifier and ammonia units ran at 100% at Coffeyville and the UAN plant operated at 97%. While at East Dubuque, the ammonia unit ran at 99% and the UAN unit ran at 98%. CVR Partners announced that it will not pay cash distribution for the third quarter of '18. Now, let me turn the call over to Tracy to talk about some financial highlights.

Thank you, Dave and good afternoon everyone. As Dave previously mentioned, we reported net income of $90 million in the third quarter of 2018 as compared to net income of $22 million in the same quarter of 2017. Adjusted net income for the third quarter of 2018 was $91 million or $0.95 per diluted share as compared to an adjusted net income of $32 million or $0.37 per diluted share in the third quarter of 2017. We believe adjusted net income as a meaningful metric for analyzing our performance as it eliminates the impact of non cash and other unusual items inherent in our business segments, and provide the more transparent U.S. to market expectations. The gross pretax adjustments to net income are reduced for the portion that is attributable to the non-controlling interest and are further reduced for the net tax impact associated with them. The total income tax expense for the third quarter of 2018 was $35 million as compared to $9 million in the third quarter of 2017. The overall effective tax rate in both 2018 and 2017 was impacted by the income or loss associated with the non-controlling interest in CVR Refining and CVR Partners' earnings and certain income tax benefits, state income tax benefits. The effective tax rate for the third quarter of 2018 was approximately 22% as compared to 26% in the third quarter of 2017. The year-over-year reduction was primarily a result of the Tax Cuts and Jobs Act, which reduced the federal tax rate from 35% in 2017 to 21% in 2018. We estimate our full-year 2018 effective tax rate to be between 16% and 20%. I'll now turn to the specific performance of our two business segments impacting our overall quarterly results. As Dave mentioned earlier, CVR Refining's adjusted EBITDA for…

Thanks, Tracy. On our previous calls, I outlined our strategic objectives for '18. In addition to running our facilities reliably and in a safe environmentally responsible manner, we have made steady progress on these objectives. We've been working to reduce our exposure to RIN. In June, we started blending B5 across RX and the third quarter marks the first full quarter of this blending activity. With the B5 blending, our internally produced RINs has increased by 5% of our renewable volume obligation. We have several deals in the works that can further increase our internal RINs generation, which we will refer on in the future. At the Coffeyville refinery, processed studies indicate that we could increase WCS processing up to 40,000 barrels, while increasing shale oil and natural gas processing. And could significantly -- could be increase significantly with a phased implementation; Phase 1 would include the addition of Naphtha hydrotreating unit and an isomerization unit to increase the capacity of our natural gas processing to 10,000 barrels a day; Phase 2 would include the addition of a gasoil hydrotreating to allow additional runs at WCS; and Phase 3 would include the debottlenecking of the reformer and a revamp of existing crude units to efficiently process 40,000 barrels a day of WCS shale oil and/or natural gasoline. If approved, these projects should all have a return in the 25% to 30% range and total CapEx is estimated at $350 million. At the Wynnewood refinery, CVR Refining has improved the Brent-free repositioning, which should increase the liquid yield by approximately 1% across the refinery. This project should cost around $11 million and has an expected greater return of 90% plus percent at a WTI price of $65 a barrel. The Brent-free repositioning should be complete during the planned 2019 spring turnaround…

Again, I’d like to thank you all for your interest in CVR Energy. Additionally, I’d like to thank all our employees for their hard work and commitment towards this safe, reliable and environmentally responsible operation. We look forward to reviewing our fourth quarter 2018 results during our next earnings call. Thank you.

Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.