CVR Energy Inc (CVI) (Q1 2024) Earnings Call Transcript Highlights: Robust Financial ...

• Consolidated Net Income: $90 million

• Earnings Per Share: $0.81

• EBITDA: $203 million

• Dividend: $0.50 per share, payable on May 20

• Petroleum Segment Throughput: 196,000 barrels per day

• Product Yield: 101% on crude oil processed

• RIN Prices: Ended the quarter at approximately $0.68

• Fertilizer Segment Ammonia Plant Utilization: 90%

• Nitrogen Fertilizer Prices: Steady compared to Q4 2023

• Free Cash Flow: $121 million

• Total Consolidated Capital Spending: Forecasted at $225 million to $250 million for 2024

• Turnaround Spending: Estimated at $55 million to $65 million for 2024

Release Date: April 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Q & A Highlights

Q: You are considered a good and safe operator, and I understand you're still evaluating what happened over the weekend, but help us understand a little bit what is it? A weather-related event, exactly what went wrong over the weekend which caused some of the issues that you're seeing? A: (David L. Lamp - President, CEO & Director) Well, we don't know exactly all the facts yet Manav, but it appears like we got hit by lightning in one of our process areas. And that lightning caused the impending fire and then that spread a little bit as it got hot.

Q: Right. So there's literally nothing you would have done about it, right? So just was trying to make sure. And my second question is looks like your PTU is now going to be up and running -- is running at your RD facility. Help us understand how -- what are you looking to transform from refined soybean oil to unrefined soybean oil? Are you looking to do some tallow and stuff? And do you think that does make a material difference to your renewable diesel profitability? A: (David L. Lamp - President, CEO & Director) Well, there's no doubt that we've been catalyst starved with the unit without a PTU. We've had pretty short runs and poor yields, I'll call it, on actual renewable diesel. We're very encouraged with the -- even buying treated feed or refined deodorized and degummed feed but still had a lot of impurities in it in the forms of metals and phosphorus and other things. And the results of the pretreater looked really good at this point. And we're starting this run with the pretreater up. And the catalyst performance is already looking very good yields of 90-plus percent on renewable diesel, and much less byproducts that we had seen before that.

Q: I wanted to follow up on your comments regarding I think you mentioned something about railing gasoline to the West Coast. So I just wanted to confirm that, that you are railing gasoline to California and capitalizing on the higher margins in that space? And also just curious, can you make that carb spec? Or is it a blended spec? And what kind of volumes are we talking about here? A: (David L. Lamp - President, CEO & Director) Sure. As I mentioned, I said to the West, not necessarily to California. But no, we have -- we put in a transloading facility ahead of third party put it in, and we're underwriting it with tariffs. But our plan is to be able to load up to 120,000 barrels per month and that's our capability of the transloader. But we'll go probably wherever the margins are the best.

Q: So I was hoping for some additional color on refining M&A in light of the 8-K. Could that impact some of the things you would otherwise do on the organic side, particularly thinking about the bigger projects you're considering with RD? Is it sort of an either/or with M&A or could both be done at the same time? A: (David L. Lamp - President, CEO & Director) Well, John, remember that our larger RD project, our SAF project, however you want to call it, is really banked on our contribution being our Wynnewood operation of renewable diesel or SAF.

Q: Dave, just building on the M&A comments that you have made and in the 8-K. Are there characteristics that you say define what would be a successful M&A transaction for you on the refining side, whether it's specific regions? And as you think about potential M&A, do you have a preference for packages versus single assets? Just trying to get a context of the framework by which you evaluate success as you consider different options. A: (David L. Lamp - President, CEO & Director) Yes. Sure, Neil. I think one of our biggest impediments to our stock price, I think, is our lack of diversification. So we've in the past, have pointed to the West is our desired area. But I don't -- I think what we need is size and scale and diversity of our refining fleet, and any of these actions and the available transactions would scratch that itch.

Q: If that's a good transaction that an acquisition target that you think is really good for you. How far you will be willing to stretch your balance sheet? A: (Dane J. Neumann - Executive VP, CFO, Treasurer & Assistant Secretary) Yes, Paul, it would obviously depend on the target and what the earnings power of that target would be. We've always kind of said we're comfortable between the 1 and 2x levered ratio. So depending on the target, I don't think our -- we want to change our debt profile materially long term. So I'd still use that as a benchmark over the long haul.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.