Greetings and welcome to the Par Pacific Holdings third quarter 2017 earnings release. 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, Ms. Christine Laborde, Director of Investor Relations and Public Affairs for Par Pacific Holdings. Thank you. You may begin.

Thank you, Melissa, and welcome everyone to Par Pacific Holdings Third Quarter 2017 Earnings Conference Call. With me today is William Pate, President and Chief Executive Officer; Will Monteleone, Chief Financial Officer; and Joseph Israel, President and Chief Executive Officer of Par Petroleum. Before we begin, please note some of the statements we make during this call may contain plans, expectations and estimates, including, but not limited, to our outlook for the company. These are forward-looking statements, which are subject to change. They are subject to risks and uncertainties, and actual results may differ materially. Because of this, investors should not place undue reliance on forward-looking statements. We disclaim any intention or obligation to update or revise any forward-looking statements. I refer you to the latest Forms 10-K and 10-Q of Par Pacific Holdings, filed with the SEC for a more detailed discussion of the major risk factors affecting our business. Further information regarding these as well as supplemental financial and operating information, including reconciliations to GAAP, may be found within our press release and our investor presentation on our website at www.parpacific.com or in our filings with the SEC. Now let me turn the call to Bill Pate.

Thank you, Christine, and good morning to everyone. Yesterday, we reported another quarter of strong financial results for Par Pacific. Third quarter adjusted net income was $26.2 million or $0.55 per share. Adjusted net income over the last 4 quarters totaled $68.3 million or $1.48 per diluted share, while adjusted EBITDA over that same time period was $143.5 million. Due to our consistent results, we've now reduced our net debt by more than $80 million over the last 12 months to $275 million. Our operating results were strong across the board. Joseph will cover our refining operational metrics in a second, but I want to emphasize the strong performance in Logistics and Retail. Each unit reported significant improvements over the prior year and on a quarter-over-quarter basis. Our Logistics business segment adjusted EBITDA was $12 million, with increased volumes in Hawaii due to growing on-island sales and improved margins in Wyoming. Our Retail business segment adjusted EBITDA was $8.9 million due to strong margins and solid growth in same-store fuel volumes and merchandise sales. Finally, we were able to achieve robust profits at our Wyoming refinery during the height of the summer season. Looking forward, we continue to see favorable environment for all of our business segments, although we expect Wyoming to return to lower seasonal norms. Cracks on the mainland and in the Pacific are good given the robust refined product demand in both regions, although product cracks are somewhat offset by a tightening physical crude market. We are pleased with the current market outlook and will maintain our focus on strong free cash flow. And now Joseph will provide more details on our operations.

Thank you, Bill, and good morning everyone. In Hawaii, combined Mid Pacific Index was $10.27 per barrel during the quarter compared to $6.87 per barrel during the quarter of 2016. On Brent basis, our 4-1-2-1 Mid Pacific crack spread averaged $9.94 per barrel, reflecting strong Singapore crack spreads for gasoline distillate and fuel oil. At the same time, global crude diffs are narrower, and our Mid Pacific Crude Oil Differential Index for the third quarter of 2017 is implying only $0.33 per barrel discount to Brent. We continue to be aggressive in our crude selection process and adjust our crude mix and mode of operations in Hawaii per demand and crude differentials. Our Hawaiian refinery throughput in the third quarter was 74,000 barrels per day, with 99.5% operational availability. Adjusted gross margin was $6.32 per barrel. Export timing and inventory adjustments have lowered our margin capture by approximately $1 a barrel. Also in the third quarter, production costs were $3.69 per barrel, and we sold 75,000 barrels per day, including 64,000 barrels per day of on-island sales. Moving on to the fourth quarter. We decided to accelerate our planned reformer maintenance by 2 months and execute it in the fourth quarter with anticipated negative $0.35 per barrel impact at gross margin level and approximately $0.07 per barrel of additional production costs. So far in the fourth quarter, our combined Mid Pacific Index is approximately $8.20 per barrel, and our fourth quarter planned throughput in Hawaii is 72,000 to 74,000 barrels per day. In Wyoming, our 3-2-1 Index was $25.29 per barrel during the quarter compared to $19.12 per barrel during the third quarter of 2016. Hurricane Harvey-related supply disruptions, combined with constructive demand fundamentals, supported our margins environment in the third quarter. Also in the quarter, our refinery throughput averaged 17,000 barrels per day, with 98.3% operational availability. Adjusted gross margin was $18.67 per barrel, and production costs were $6.67 per barrel. We successfully executed our planned 14-day turnaround in October. We now have new catalyst in the reformer plus new catalyst and improved capabilities in our diesel hydrotreater. Estimated turnaround impact on our Wyoming fourth quarter result is approximately negative $1.20 per barrel at gross margin level and additional $0.50 per barrel of production costs. So far in the fourth quarter, our Wyoming 3-2-1 Index has averaged approximately $27.50 per barrel, and our target throughput in Wyoming is 14,000 to 16,000 barrels per day. At this point, I will turn the call over to Will to review consolidated results and Laramie highlights.

Thank you, Joseph. It was a strong quarter across each of our business segments. It was also a quiet quarter other than approximately $1.5 million positive benefit within our Wyoming Refining operations associated with FIFO accounting in a rising price environment. If you recall, I called out the negative impact of FIFO in the second quarter to have a similar amount. Cash from operations totaled $43 million during the quarter, and our net debt to capitalization continued its downward trend to 39%. Our interest expense totaled $7.4 million during the quarter, and as of November 6, our total liquidity was $124 million. During the quarter, our capital expenditures totaled $8.1 million net of third-party reimbursements. We reiterate our capital expenditure annual target range of $38 million to $42 million, with the majority of spending occurring within Wyoming Refining and Hawaii Retail during the fourth quarter. Moving on to Laramie. Laramie generated approximately $14 million in EBITDAX and a net loss of $1.8 million, including $2.3 million in unrealized derivative gains and $1.4 million in realized derivative losses, for a net derivative benefit in the quarter of $0.9 million. During the quarter, Laramie spud 40 and completed 29 wells, finishing with 48 drilled but uncompleted wells. September exit production was 142 million cubic feet a day equivalent, and completion activity is accelerating, driving expectations for December exit production between 160 million and 170 million cubic feet a day equivalent. Net backs continued to improve based on modifications within Laramie's processing contracts. Unhedged price realizations were the following: natural gas, $2.72 per Mcf; natural gas liquids, $0.49 per gallon; and condensate of $42 per barrel. Capital expenditures totaled $36 million, leaving our revolver balance of $149 million as of September 30 and debt to EBITDAX of approximately 3x. Recently drilled and completed wells are ranging between $900,000 to $950,000 per well. To protect Laramie's return profile on the new wells brought to sales, additional natural gas hedges were added, totaling approximately 15 million cubic feet a day equivalent for 2018. While early in the budget cycle, preliminary expectations are for Laramie to continue its 2-rig program and for periodic reviews of expanding the rig program to 3 to 4 rigs depending upon returns. This concludes our prepared remarks. Operator, I'll turn it back to you for Q&A.

[Operator Instructions]. Our first question comes from the line of Chi Chow with Tudor, Pickering, Holt. Please proceed with your question.

Thanks. Good morning everyone.

Good morning.

Will, the debt reduction in the quarter, what tranches of debt were retired in 3Q? And it just seems like that was a little bit higher than what your scheduled '17 maturities were. So any detail there would be helpful.

Sure, Chi. So I think during the quarter, we reduced our principal debt balance by roughly $12 million. Roughly $5 million of that is a lower revolver balance at Wyoming, and the balance is really made up of the mandatory amortization across the Wyoming term loan, the Hawaii retail term loan and J. Aron forward sale agreement. That's really the primary driver. And then the net debt or the cash position really did go up by roughly $24 million. So you combine those 2 pieces, and that's where you see the net debt reduction that were commenting on.

Got it. Any plans you can talk about on 4Q for the reduction?

I mean, I think the opportunities that are a little longer dated are the Wyoming holdco term loan that we have there. It's about $67 million. It's L plus 9.5%. It's got a prepayment penalty that is in effect until really July of next year. That's the highest-cost debt that we have in place. We can continue to work the revolver balances lower and the J. Aron forward sale. All of our debt fully prepayable other than the Wyoming holdings term loan. So those are our opportunities for further debt reduction.

Okay, great. And second question. It looks like your operating results have really solidified over the last couple of quarters here. Do you feel like that refining ops are at this point optimized, then I guess across Retail and Logistics as well? And if not, can you point to what you're focused on, on further improvements from here?

Yes. There's always a room for opportunities. We continue to invest in integrated growth in our system and improve our cost structure and select our crude in different ways. And we will continue to go for these types of opportunities. And do you want to cover Logistics, Retail?

Yes. Chi, just to add to that I think with respect to Refining, too, we have some larger projects that are still relatively small that will play out over the next 18 to 24 months, specifically the distillate hydrotreater that provides for growth in 2019 and beyond. And we're working on other projects like that and also working on some smaller-capital projects in and around the refining operations. And then in addition to that, the logistics system is, I would say, somewhat underutilized. And as we grow our volumes, we're finding that we can reduce our unit costs in both areas. And I think that is reflected in some of the performance in the third quarter of 2017, and that's something we hope to continue as we go forward. So that's more a function of growing our volumes and utilizing our systems better. At some point, there may be bottlenecks, and that may require a little more capital, and we'll just have to be careful and judicious about debottlenecking those logistics kinks.

And Chi, this is Will. The only thing I'd add is in Wyoming. As Joseph referenced, we did complete the work there that expanded our diesel hydrotreater. And that should over time give us more flexibility to toggle our distillate yields up in Wyoming. So again, that's probably not so much a story when -- if you look specifically at the third quarter, but it is a story over a 12-month horizon for Wyoming, substantially higher than -- sorry, go ahead.

Yes. We added 700 barrels per day of diesel capacity in Wyoming, and our yields are now 50% distillate and close to 50% in Hawaii. So our refining system is approximately 12% higher on distillate yield than the industry average. We're well positioned for the winter and with the diesel strong outlook.

Yes. Good for 2020s.

[Operator Instructions]. Our next question comes from the line of Tim Rezvan with Mizuho Securities. Please proceed with your question.

Hi. Good morning folks.

Hi Tim. Good morning.

A couple of questions. I'd like to kind of go higher level on the strategy side. Debt to cap below 40% now, equity continues to be strong. You're in a very good position to play offense relative to a year ago. I was wondering if maybe, Bill, you can give any kind of high-level commentary on what you're seeing on the A&D front.

Sure. I mean, let me say first that the projects that we just discussed, the distillate hydrotreater in Hawaii, the diesel hydrotreater expansion in Wyoming and similar projects like that, that we're focused on internally, those will provide a much higher risk-adjusted return than any acquisitions that we reviewed to date. So that's our principal focus. And we believe, with these alone, we can increase our adjusted earnings per share in that asset base. And with the healthy free cash flow, we can pay down our debt to -- and continue to generate cash flow and pay down debt. In terms of acquisitions themselves, our focus continues to be on those assets that would have a strong fit with our current businesses in Wyoming and Hawaii. I think particularly in Wyoming, there are opportunities to expand in and around the refinery and allow us to capture more margin.

Okay, okay, that's helpful. And then I guess kind of a follow-up. Natural gas prices remain considerably range-bound here. I know some investors have been pretty clear and kind of had a view of the strategic kind of value of holding Laramie. But I don't know if this is something for Will, but how are you all sort of thinking about that kind of given kind of the limited upside that a lot of people see in gas going forward, keeping Wyoming in the portfolio?

Sure. So I think our base case for Laramie is that this 2-rig program really allows us to generate well north of 25% rates of return at the wellhead. And I think our current views with respect to the current A&D market for assets in the Rockies is there's limited value being paid for undeveloped locations. And again, with the inventory we see with the restructurings of the gathering processing agreements as well as the fact that we're getting liquids, which is a pretty important part of the overall story for Laramie, we think it is actually a little differentiated than some of the other asset packages that are out there. So I think we like the diversification right now. I think it is something that we will look to monetize over time, but it's ultimately something that I think the proved developed production, in growing that, it's going to yield the most attractive return from our perspective.

Okay, okay, appreciate that. And then one final one. I may have written this correctly, but I believe for 3Q, there was an expectation of operating costs of around $3.50, and you came in at $3.69. I'm not sure if my memory is correct, but was there anything of note in the third quarter that sort of nudged operating costs up a little bit higher?

Yes. It's in the range, and we did have inventory noise inside our OpEx at approximately $0.20 per barrel. So without that noise, we would report exactly $3.50 per barrel for the quarter. So it is in the range, and this is also a good guidance going forward.

Okay. Thank you all.

Thank you. Our next question comes from the line of Andrew Shapiro with Lawndale Capital Management. Please proceed with your question.

A few macro questions, and then wanted to drill down micros. First off, as you talk about these crack spreads and they continue to improve, would you now consider us still in the mid-cycle or we're now at the high end of the cycle?

Andrew, I think you have to view each crack in each region separately. So you take the Wyoming market, we certainly got some lift in the latter part of the third quarter, and it's continued really up through this week. And I think a lot of that's related to Harvey and then the reduction of inventories in the mainland. We still think that the market will come down some seasonally, but going into this quarter, we're seeing more strength than we typically see. And given the reduction in inventories and the balance in the market, 2018 for Wyoming, I think, shapes up pretty well. When you look at the Pacific region, cracks are, I'd say, relatively strong. Although they've weakened, you can see that our combined index actually is below the mid-cycle at this point, it appears that a significant amount of that reduction is related to a tighter physical market, as I mentioned, and the fact that crude procurement in the Pacific basin and generally in Asia has been tighter. And I think that's a function of the action of the Saudis and tightness in the physical market. It's hard to determine where that goes, but we're certainly prepared for a tighter physical market there and believe that the cracks will probably continue to move along at the level they are right now because the inventories in the Pacific are also relatively stable. Would you add anything to that, Joseph?

There are definitely constructive demand fundamentals in the oil market. After all, we are expecting this year a 3.5% GDP growth and 2 million barrels per day of oil demand growth. As a result, we have cleared very fast inventory surplus with strong demand and tight supply. We are well positioned as an industry for the winter with low inventories and relatively strong cracks in both markets really. In Wyoming, more significantly impacted by Hurricane Harvey after math inventory balance.

Okay. And then drilling down a little bit here. Is there any particular reason that you guys chose to sizably increase the cash balances rather than pay down additional debt? Was it because prepayment penalty is in timing? Or are you anticipating deploying the capital? What's the cause of letting it go? I wouldn't say letting it go. It's not a bad thing except it doesn't earn as much as your debt's costing you.

Sure. Yes, I mean, Andrew, I think some of this is within the subsidiary levels. We do have some cash traps down at certain levels. So that's part of it. The second is, again, I think, trying to retain some flexibility with respect to the path forward on the Wyoming holdings term loan. And as we're marching towards that prepayment penalty lapsing, having an adequate cash balance to deal with that if we need to with cash on hand is certainly one possibility. So again, I think we're trying to strike the balance of having adequate dry powder to address that as well as any inorganic opportunities that we'd pursue.

And then with respect to the -- on the Wyoming refi down the road, is that something where you'd be looking at duration or mostly basis point reduction?

Likely both. I mean, I think we're constantly looking at our capital structure alternatives, whether that includes something up at the parent company level that would make for a simpler capital structure that would have longer duration or whether that's a reduction in coupons down at the opco levels. So I think both of those alternatives are things that we've evaluated. I think given the performance at Wyoming and the results there and in our debt balance, we certainly feel like we could achieve a lower cost of capital at the subsidiary level there today.

And are you comfortable with -- in establishing, is it 100 basis points, 200 basis points, you think you might, upon a refi, be able to extract out of the costs?

Yes. I think we'll have to wait until we see where the market is when we're trying to address it at that point. So I don't think I can provide a specific number at this point.

And then the last 2 questions. So one's a little bit micro. What activity during the quarter caused the goodwill on the balance sheet to rise from the prior quarter? I think it would have sequentially, but I didn't know if there was any acquisition activity or whether it would be revaluations. So I just didn't -- I spotted that, and we can call -- if you can call us on that off-line, that's fine.

Sure. Let's take that off-line. We're not aware of anything material.

Yes. No, it wasn't that large, but it was just that it had been flat, and then all of a sudden there was some movement, and I didn't know of any acquisition. And lastly, in the next 6 months what's the visibility on your investor outreach/road -- non-deal road shows, et cetera, conferences?

Christine, do you have that schedule?

It's Christine. Next week, we are going to the Seaport conference, and then we plan to go to the Mizuho and Cowen conferences in December and then Argus and the Wolfe conferences in January.

Great. Thanks guys.

Thanks Andrew.

Thank you. Our next question comes from the line of Chi Chow with Tudor, Pickering, Holt. Please proceed with your question.

Just a follow-up on the comments on the tighter physical crude markets. Would you say that this is a bit of a headwind for Q4 capture rates? And any thoughts on how the slate may change at Hawaii?

Well, first of all, it probably is a headwind, but I think it's reflected in the combined index to a certain extent because the combined really takes our product cracks, the 4-1-2-1 and the crude differential. And if you look at the last week of October, you can see that we've gone -- and this is on an FOB basis, but we've gone from a discount to Brent to a premium to Brent over the last several months. So I would say that it is impacted in the combined index. And then I think rising prices in general will create a little bit of a headwind as well. I'm not sure how material it'll be, but it's something that we have to think about. And then the shape of the curve. If the market is flatter, that tends to impact as well because of the length of the move of our physical crude.

Okay. And any thoughts on the sustainability of Brent TI above $6 going forward here?

I think the $2 to $3 in the past reflected incremental Brent barrel coming to the Gulf Coast and with parity in the Gulf Coast and now with 2 million barrels per day of oil exports from the U.S., call it WTI, call it LLS, that parity point has shifted toward Asia, and Latin America as the incremental barrel. And to compete there with Brent, we are now talking about a completely different cost structure. Take TI from Cushing to the Gulf at around $3 plus, $4, $5 of shipping, it has to compete with Brent. I think a spread of $4, $5, $6 longer term is more sustainable than the $7, $8 we have today, or the $2 to $3 we have seen before.

Okay, that doesn't make the good thoughts. Maybe one final question here back on Retail. You got a nice trend going the last couple of quarters on your fuel sales per site kind of ticking up. Can you talk about those trends there? And is what we've seen for Q2 and Q3 kind of more normalized levels of fuel volumes going forward?

I think we've seen some good growth. And just in terms of our share, just to reiterate, as -- I didn't give you the specific numbers, but fuel volumes on the same-store sales were up 2.5% for the quarter. So we saw a similar trend in Q3 that we saw in Q2 and Q1. I think it's just a strategy, as I mentioned in the last quarter, of being a little more sophisticated in pricing on the street, and it's also a reflection of a pretty strong market out there.

Hele impacts kicking in as well, you think, Bill?

I think Hele is a factor, but I think we're seeing similar growth on the 76 side. I mean, they're both -- honestly, both brands are showing similar growth profiles. We're taking -- as I mentioned last quarter, there were a couple of new openings with some competitors that had some impact in the quarter, but it wasn't huge.

Okay. Thanks Bill. I appreciate it.

Thank you. Ladies and gentlemen, there are no further questions at this time. I will turn the floor back to Mr. Pate for any final comments.

Thank you. We're happy with our team's performance this year. We'll remain focused on generating strong free cash flow to reduce our debt and bolster our balance sheet, and we'll continue to grow our adjusted earnings per share. Thanks for joining us. Have a good day.

This concludes today's teleconference. Thank you for your participation. You may now disconnect your lines.