Good morning, and welcome to the Par Pacific's Second Quarter 2025 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ashimi Patel, Vice President of Investor Relations. Please go ahead.

Thank you, Jason. Welcome to Par Pacific's second quarter earnings conference call. Joining me today are Will Monteleone, President and Chief Executive Officer; Richard Creamer, EVP of Refining and Logistics; and Shawn Flores, SVP and Chief Financial Officer. Before we begin, note that our comments today may include forward-looking statements. Any forward-looking statements are subject to change and are not guarantees of future performance or events. They are subject to risks and uncertainties, and actual results may differ materially from these forward-looking statements. Accordingly, investors should not place undue reliance on forward-looking statements, and we disclaim any obligation to update or revise them. I refer you to our investor presentation on our website and to our filings with the SEC for non-GAAP reconciliations and additional information. I'll now turn the call over to our President and Chief Executive Officer, Will Monteleone.

Thank you, Ashimi, and good morning, everyone. Second quarter adjusted EBITDA was $138 million and adjusted net income was $1.54 per share. Strong operations, combined with improving market conditions enabled us to generate solid profits during the quarter. We set a quarterly operational throughput record in Hawaii and the commercial organization was well positioned to capture improving market conditions during the Montana turnaround. Product margins remained firm with a combined index of approximately $13 per barrel so far in the third quarter, especially favoring our distillate-oriented yield profile. The Asian market outlook remains favorable with minimal increases in Chinese exports despite arbitrage opportunities to Europe. Each of our businesses is well positioned to maximize rates as we enter the third quarter. Our retail business continues to shine. Quarterly, same-store fuel and in-store revenue increased by 1.8% and 3% compared to the second quarter of 2024. Underlying profitability also improved, as demonstrated by our last 12 months total adjusted EBITDA climbing to $85 million. We also made considerable progress on key objectives during the quarter, and we are well on our way towards achieving our strategic priorities for the year. Montana team delivered solid results, executing the largest turnaround in the site's history. The completion of this event marks the approximate 2-year anniversary of the Montana acquisition. During this time, we addressed many of the higher risk reliability items. As we've done in prior acquisitions, we will now shift our focus towards improving the profitability of the site through a series of low capital, high-return projects. The Hawaii and Renewables team progressed the SAF project and remain scheduled for start-up in the second half of the year, and we are nearing mechanical completion and commissioning of the pretreatment unit. We're also pleased to announce the joint venture with Mitsubishi and ENEOS…

Thank you, Will. Second quarter combined throughput was 187,000 barrels per day. In Hawaii, throughput was a record 88,000 barrels per day and production costs were $4.18 per barrel. Hawaii delivered strong results due to reliable operations, which enabled the site to run near nameplate capacity throughout the quarter. This record is a result of focus and effort of our team to sustainably de- constrain Hawaiian operations over the last 18 months. Washington throughput was 41,000 barrels per day and production costs were $3.73 per barrel, which highlights the site's low cost and efficient refining structure. Shifting to Wyoming, throughput was 13,000 barrels per day and production costs were $14.50 per barrel impacted by lower throughput and an incremental $4 million due to the crude heater outage. The refinery returned to full production capacity in April, and we expect to return to our normal OpEx run rate in the third quarter. Finally, in Montana, second quarter throughput was 44,000 barrels per day and production costs were $14.18 per barrel, reflecting lower throughput related to the successful completion of the FCC and alkylation unit turnaround. As Will said, we are pleased with the team's performance and their solid execution of the site's largest turnaround ever. Looking ahead to the third quarter, we expect Hawaii throughput between 78,000 and 81,000 barrels per day with July runs impacted by weather-driven crude delivery delays. Despite this, Hawaii downstream conversion units remain fully utilized through the consumption of intermediate inventory. Shifting to the Mainland, we expect Washington throughput to be between 39,000 and 41,000 barrels per day, Wyoming between 18,000 and 19,000 and Montana between 54,000 and 56,000, resulting in a system-wide throughput between 190,000 and 205,000 barrels per day. I'll now turn the call over to Shawn to cover the financial results.

Thank you, Richard. Second quarter adjusted EBITDA and adjusted earnings were $138 million and $78 million or $1.54 per share. Our Refining segment reported adjusted EBITDA of $108 million in the second quarter compared to a loss of $14 million in the first quarter. Starting in Hawaii, the Singapore 312 averaged $13.56 per barrel and our crude differential was $4.99, resulting in a Hawaii index of $8.57 per barrel. Hawaii margin capture was 119%, including a combined $4 million headwind from price lag and product crack hedging. Excluding these items, margin capture was 125%, reflecting favorable yield and reduced product imports, driven by record quarterly throughput rates. Looking ahead to the third quarter, we expect our Hawaii crude differential to land between $5.75 and $6.25 per barrel. In Montana, our index averaged $20.29 per barrel, margin capture was 110%, highlighting our ability to maintain strong clean product sales through strategic inventory drawdowns despite lower throughput rates during the turnaround. Looking ahead, our Montana indicator averaged $15.13 per barrel in July, supported by strong distillate margins across the Northern Rockies, offset by tighter heavy crude differentials. In Wyoming, our index averaged $21.41 per barrel, margin capture was 87%, impacted by the recent outage as we resumed full throughput rates in late April. Under FIFO accounting, we continue to expense high-cost purchased products into May, which reduced second quarter gross margin by approximately $8 million. Looking to the third quarter, we've returned to normal operations and expect OpEx to revert to prior run rate levels. Lastly, our Washington Index averaged $15.37 per barrel, an improvement of approximately $11 from the prior quarter, driven by tight distillate supplies in the P&W. Margin capture was 75%, below our guidance range of 85% to 95%, primarily due to higher sales mix of asphalt and intermediate…

[Operator Instructions] And our first question comes from Matthew Blair from TPH.

Could you talk a little bit about the drivers behind the strong capture rates in Hawaii in the second quarter? I believe your overall capture was 119% of your indicator. And I think you mentioned that areas like price lag and the hedging were actually headwinds in the quarter. So what was on the other side of the provided tailwinds and enabled such a strong capture figure?

Yes, Matt, this is Shawn. You're correct. Our reported capture was 119%. And excluding the nonrecurring events of the price lag and crack hedging, was 125% and I think over the last 2 or 3 years, our average capture in Hawaii has been 120%. So I think we've shown that we can outperform our steady guidance of 110% capture. And that's primarily driven by elevated clean product freight rates, which is included in our sales contracts. And then as you see throughput rates move higher, closer to nameplate capacity, our yield expense improves materially on a barrel-for-barrel basis. So I think as long as we sustain throughput rates in the mid-80s and continue to see elevated clean product freight, I fully expect capture rates to continue to outperform our guidance.

Yes, Matt, this is Will. I think that what I'd point out here is just at 88,000 barrels per day throughput rate. Again, this reflects, I would say, over 18 months of work by the Hawaii team and really deconstraining and just improving overall heater efficiency inside the plant. And so again, I think the yield profile on those last barrels produced is very attractive.

Sounds good. And then the SAF JV looks like a total home run for Par. Could you talk a little bit about how that deal came about, the benefits to Par from that deal? And then what -- is there an update on the start-up timing and when you would expect the EBITDA contribution to begin to flow through the Par financials?

Sure, Matt. Yes. I think the discussions have been ongoing for an extended period of time. And I think the key thing that's driven really the partnership here is the, I'll just say, relative attractive elements of our project. And so I think we've been mentioning this, but I'll reiterate, but I think at the end of the day, we see our SAF project is very attractive relative to the industry and it's driven really by, I think, our operating expense, given that it's inside the fence line of the plant. On a per gallon basis, we'd expect it to be very attractive and highly competitive. Second really is logistics. I think we expect over time to sell the vast majority of our products locally in Hawaii, and I think that allows us to leverage our existing proprietary distribution system. And then I think the capital efficiency of the project is the other piece that we've been touting. And so I think when you look at all those facets, it's kind of the key ingredients for bringing in a partner of the quality of Mitsubishi and ENEOS. And then I think ultimately, it was definitely not a 2 plus 2 equals 4, but I think it's a great opportunity for us to expand our distribution capabilities on the West Coast, Mitsubishi and others have access into the California market, which complements our positioning in Washington and just expands the flexibility that we're going to have in the overall renewable fuels business. So I think long story short, I see this being an attractive long-term partnership that unlocks the value of the renewables business and then also brings to bear a larger global scale that Mitsubishi and ENEOS have. So again, very pleased with this, and I think it helps shine a light on the attractive elements of the project that we've been working on. And in terms of start-up, I think we're targeting second half of this year. We're intending to bring online the pretreatment unit first, as I've referenced, go through the commissioning process there. And I wouldn't expect to start to see financial contributions from the JV until really the first quarter of '26. And just keep in mind, we'll be in commissioning and really getting through the, I'll call it, credit pathway establishment. And so I think it's going to take us a quarter or two before we get to kind of the right CI scores and ultimately to the run rate contributions for that business.

The next question comes from Ryan Todd from Piper Sandler.

I wanted to talk about -- a little bit about the Rockies. Obviously, really strong performance in Montana and Wyoming in the quarter. Some of that due to excess inventory sales. Can you talk about maybe how much is due to the excess inventory sales and what you're seeing on broader dynamics in the region as you look forward from here?

Yes, Ryan, I'll take the excess inventory sort of impacts on capture and will turn it to Will to talk about sort of the PADD 4 market in general. But I think the market environment that we're operating in the second quarter supported our capture guidance range of 90% to 100%. I think what drove capture closer to the 110% was our ability to draw down diesel and gasoline inventories. And so then it's just a function of sales [indiscernible] versus throughput. I think looking ahead, I'd just reiterate our guidance of 90 to 100 into Q3.

And then, Ryan, on the broader market, I think the kind of PADD 5 and PADD 4 distillate markets are particularly tight, I think big picture. I think you saw the export market open up in the PADD 5 market. You saw global distillate inventory start to draw down well below historical averages and that opened up, I think, attractive netbacks for exporting diesel. On top of that, I think you've seen production of biodiesel and renewable diesel come off materially. And I should also say, imports of diesel and renewable diesel come off materially as you saw the blenders tax credit expire and so you've had both export of conventional diesel and then reduction in renewable barrels available as we kind of worked into the second quarter. So I think the market and supply position there is tight. And I think that's really reflective of a globally tight distillate market. So those are the key drivers, and I'd broadly say a pretty typical driving season in terms of demand and fundamentals on the gasoline side is what we've seen so far.

Great. And then maybe one on kind of use of cash and shareholder returns. You've been pretty active in the first half of the year in terms of share buyback. You've got $100 million coming in the door from kind of proceeds from JV, CapEx budget that's rolling off pretty materially as you highlighted here in the second half of the year. But you've also talked in the past about being opportunistic and shareholder returns. So how do you think about those dynamics as you look at the second half of the year?

Sure. Yes. I mean what I would say is really our historical framework still holds today. And what I'd say is when we're in an excess capital position like we are today and like we expect to improve and we get the chance to repurchase our shares below intrinsic value, and we see that opportunity. And I think that opportunity is going to come and go based on the many variables that impact our business and markets as a whole. And really, I think a nimble approach is critical. We live in a volatile world, and things are changing quickly, and what I would say is, as a management team, what we're focused on is really actively weighing our growth prospects. That's both the internal growth capital projects that we're generating as well as any M&A opportunities against those opportunities to repurchase stock and other capital allocation alternatives. And I think I'll just say it a little differently. I think we really just want the most options on the table that we can execute at any point in time so that we can adapt quickly to how quickly the world is changing.

[Operator Instructions] And our next question comes from Neil Mehta from Goldman Sachs.

Just want your perspective on small refinery exemptions. Where do you think we are in terms of the time line? And then any advice in helping us to size what this could mean for Par's cash flow?

Sure. So I think broadly on small refinery exemptions, our expectation is that the EPA will, I would say, follow the law and from our perspective, that means that goes through a rigorous kind of refinery by refinery BOE scoring process to assess each plant. And so -- and to give you some context, in the past, I would say all three of our mainland refineries have qualified and received small refinery exemptions in the past. And so I think that's really our expectation of the process. In terms of the timing, I won't even hazard a guess, Neil. I think this is highly politicized effort on all sides. And unfortunately, there would just be speculation to try and say that we know what the time line is because it's been difficult for them to maintain a schedule. In terms of sizing of the opportunity, maybe I'll turn it to Shawn just to talk about the overall RIN positioning for us as a whole and what it means. Before I do that, I just want to clarify any exemptions and return of RINs would be upside to us, right? We have really a balanced RIN asset and liability position today.

Neil, this is Shawn. To Will's point there, we've covered our obligations going back to 2019 through 2024. So any retroactive receipt of a small refinery exemption would be sort of direct cash proceeds in terms of getting RINs back and selling those at market prices. I think when you think about our exposure on a go-forward basis, the mainland refineries have about $140 million RIN unit gross exposure. And so I think that's the best way to size up given that those three refineries received SREs in the past.

That makes sense. And then in time just talking about the Singapore market. Hawaii is, I would characterize it, at or maybe even above mid-cycle. So that happened really quick. It's great to see but just the sustainability of it and there's some moving pieces here, right? Asia demand, Chinese oil demand is not that good. India, there's some debate around tariff impacts out there, and then we have this potential for the Chinese to ramp up product exports. So how do you think about some of those moving pieces and risks as you assess the path forward for Singapore margins?

Yes. I think we watch the Singapore market closely and I think really have for the last 12 years. And I think the theme that we continue to see is that the overall Chinese refining fleet remains focused on meeting internal demand is sort of one theme that we see. And the second is really just deeper and deeper integration between the refining fleet and their petrochemical complex. And so I think really internalizing demand and then also shifting product yields to the lighter end products so that they can internalize their petchem complex. And so I think those are the kind of the key policy pieces that we watch in terms of the, I'll call it, export relief valve, it seems like that's been relatively well contained. And I wouldn't say we see anything right now that suggests that there's a material change coming in the future on Chinese exports given their stated policy objectives. So I think that's sort of the incremental supply point that we see. And I think big picture of demand in the Asia Pacific market remains steady and a fair amount of, I'll just say, arbitrage barrels are still needed to clear from the Middle East and in India and even potentially from North Asia all the way into Europe to kind of keep the Atlantic Basin balance for distillate. So that's kind of the key thing we're watching, and I think we don't see a major shift there.

The next question comes from Michael Latimer from TD Cowen.

It's Mike here on for Jason Gabelman. First, could you just talk about how your niche markets in the Rockies and Pacific Northwest are shaping up quarter-to-date? Markets like Portland, for example, have been pretty elevated for quite some time now, so I'm just trying to get a handle on the durability of those margins.

Sure. Yes. I think I referenced this that our July combined index is about $13. So far [indiscernible] of aggregates all of our markets, and that's pretty flat to where we were in June. And so I think the overall story there is probably very similar to what we saw in the back half of the second quarter in terms of the distillate market being strong. And I commented on this previously, which is, I think, principally driven by open export market and reduced supply of biodiesel or renewable diesel, but were not domestically produced as well as imported, given the changes in the recent PTC, the production tax credit. So I think those are the factors that are influencing the distillate side of the barrel. I think we see strong demand, I think, in particular, debt demand strong globally. And so all those pieces are kind of pulling on the distillate barrel and the gas kind of side of the equation, I would call it, broadly probably a mid-cycle market condition. And then I think the biggest thing to watch in the future is really the changes in California refining fleet. And to the extent that we do see the two competitor refiners there in Los Angeles and San Francisco, ceased operations in the fourth quarter and the first quarter of next year, I think it really further shifts the kind of import export parity balance over time, which I think practically speaking, just puts you more into a position where you're equally relying on renewables and biodiesel to balance the market.

All right. Great. And then my last one is just how you're thinking about your excess cash position. I think in the past, you've mentioned that the business is comfortable around $300 million of liquidity. So is still -- is that still the right range to think about? And then as your stock has run up a bit, just how your appetite for M&A would be with that excess cash?

Yes. I think we've stated that our minimum liquidity target is $250 million to $300 million. So we're certainly in an excess capital position today. And as Will sort of mentioned in the earlier Q&A, I think we're going to continue to think about capital allocation in the same light and measure our opportunistic buybacks with pursuing our strategic growth priorities.

And on the M&A front, I would just say it's a -- I'd say, still a challenging market from a bid and ask perspective. And I'd say we're today principally focused on trying to find and develop internal opportunities or sort of smaller scale bolt-on solutions that help advance really principally on the cost reduction side, but certainly on other elements of market access that could improve our business, particularly on the Mainland.

The next question comes from Manav Gupta from UBS.

I apologize guys, I was having some technical difficulties, so couldn't join in time, so if this question has been asked, I apologize. But I just wanted your views on global quality discounts out there. How do you see heavier sour and other kinds of barrels in the global markets trades versus the light sweet barrels, if you could talk a little bit about that?

Sure. I would say -- big picture, I would say the -- I'll say the future incremental supply looks like it should, I would say, add pressure and expand the heavy light dip as we head into the winter. I would tell you that not seeing signs of that in the prompt market, and that probably goes all the way out into the September, October time frame. So continue to see A&S and grades like that trade at some pretty elevated premiums to Brent. And so I would say, while incremental supply should help kind of bring quality differentials or expand quality differentials again, have not seen that emerge at this point.

You are seeing some tightening on the WCS side. Any comments you would like to make on that? I think WCS has now dropped to like 13% to WTI, but if you could -- because you do use a lot of WCS in the system. So if you could talk a little bit about the WCS market also?

Yes. I mean I think certainly been tighter than we would expect in the, I'll say, almost in the high single digits at points in time here. And I think a little bit of incremental supply coming back on from Latin America and probably some reduced runs here as you get to the turnaround season in the fourth quarter, I think, are setting the stage there for a bit wider differentials there. So those would be kind of the incremental changes that we've seen, nothing earth shattering there probably to what you've heard in the market from other parties.

There are no more questions in the queue. This concludes our question-and-answer session. I'd like to turn the conference back over to Will Monteleone for any closing remarks.

Thank you. We're encouraged by the improving market backdrop and remain focused on executing on our key objectives as the key to driving our shareholder value. Thank you for joining us today.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.