Participants

Ashimi Patel; Director - Investor Relations; Par Pacific Holdings Inc

William Monteleone; President, Chief Executive Officer, Director; Par Pacific Holdings Inc

Richard Creamer; Executive Vice President - Refining and Logistics; Par Pacific Holdings Inc

Shawn Flores; Chief Financial Officer, Senior Vice President; Par Pacific Holdings Inc

Ryan Todd; Analyst; Piper Sandler & Co.

Matthew Blair; Analyst; Tudor, Pickering, Holt & Co. Securties, Inc.

Neil Mehta; Analyst; Goldman Sachs & Company, Inc.

John Royall; Analyst; J.P. Morgan Securities LLC

Jason Gabelman; Analyst; Cowen & Co., LLC

Manav Gupta; Analyst; UBS Securities LLC

Presentation

Operator

Good day and welcome to the Par Pacific First Quarter 2024 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal Commerce conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question. You may press star, then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Schumy Patel, Vice President of Investor Relations. Please go ahead.

Ashimi Patel

Thank you, Danielle, and welcome to Par Pacific's first quarter earnings conference call. Joining me today are well months' Lyons, President and Chief Executive Officer, Richard Kramer, EVP of refining and logistics, and Sean floor as 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. And I'll now turn the call over to our President and Chief Executive Officer, Will Monteleone.

William Monteleone

Thank you, Jamie, and good morning, everyone. Before discussing the quarterly results, I want to thank Bill Pay for his many contributions to Par Pacific success over the last two years. Bill has been a terrific partner and a guiding force in the Company's formation and strategic direction. I'm grateful for his leadership and honor to build upon our strong foundation as a leading conventional and renewable fuel provider for the Western United States.
Moving on to quarterly results. Our first quarter adjusted EBITDA was $95 million and adjusted net income was $0.69 per share. Our retail and logistics business units delivered stable earnings contributions, while strong operational execution in the refining segment positions us to increase production during the profitable summer driving season. Our Billings Refinery is in the process of restarting further improving our summer operating position. Richard will provide more details. Global product inventories are presently low. The well-balanced supply side support appears limited incremental Chinese exports are expected to be flat to down year over year, and national policies remain focused on adequate local market supply, both transportation fuels and petrochemicals.
In addition, we see refined product freight costs remaining elevated inflating the cost arbitrage between markets and highlighting the benefits of local manufacturing. This is likely to become a larger factor as we enter the summer driving season and marginal supply would need to stretch further to solve for marginal demand. Our retail brands continue to build momentum with teams, same-store fuel and merchandise sales growth of 6% and 5%, respectively. The retail team has focused on growing foodservice gross margin, rolling out core systems to better manage and store costs and building a pipeline of remodel and new to industry sites are relatively young brands continue to be well received in the local markets we serve, as demonstrated by the above trend growth rates. Progress continues on our renewable fuel initiatives and Ally.
The $90 million renewable hydrotreater project is tracking on time and on budget. And the renewable fuel cogeneration project with Hawaiian Electric is progressing towards a potential power purchase agreements in Piccoma, we are pivoting from the larger SAS and green hydrogen project process, lower capital return opportunities. Our balance sheet remains well positioned thus far this year, we further reduced our cost of debt capital and repurchased more than $70 million of our stock at attractive prices with more than $575 million of liquidity. Our balance sheet remains strong, allowing us to both opportunistically repurchase our stock and pursue our strategic objectives. Looking forward, we are focused on safe and reliable operations, CHRIS project execution and thoughtful capital allocation. We are committed to managing risks and also position our enterprise to generate strong returns through the cycle.
I'll now turn the call over to Richard to discuss our refining and logistics operational performance, if you will.

Richard Creamer

Turning to the refining segment, first quarter combined throughput was 181,000 barrels per day, reflecting winter seasonality and maintenance activities and Y three throughput was 79,000 barrels per day and production costs were $4.89 per barrel for crude rate was reduced for 10 days in March as we resolve the following issue in our crude back in power, we have restored operations and demonstrated a return to full crude capability for billings. First quarter throughput was 53,000 barrels per day despite seasonality, crude rates were elevated as we built inventory ahead of the second quarter turnaround first quarter production costs were quote dollars $0.44 per barrel, elevated by approximately $5 million due to increased electricity costs and pre turnaround related OpEx mailings, crude and reformer blocks have been in turnaround since early April. The turnaround has progressed to plan and is on schedule and on budget. We are currently in the beginning stages of start-up operations.
Shifting to Wyoming, refinery availability has been excellent. Throughput was a first quarter record of 17,000 barrels per day and production costs were $7.86 per barrel. Finally, in Washington, first quarter throughput was 31,000 barrels per day and production costs were $6.7 per barrel, elevated by approximately $1 million due to a 15 day planned March maintenance event. The refinery is back to full rates and operating well in the second quarter.
Looking ahead, each of our assets are positioned to optimize throughput heading into the summer season. For the second quarter, we expect the white throughput at between 81,000 and 84,000 barrels per day. Wyoming between 18,000 and 20,000 barrels per day, Washington between 39,000 and 41,000 barrels per day and billings between 34,000 and 38,000 barrels per day, reflecting the second quarter turnaround activities.
I'll now turn the call over to Sean to cover our financial results.

Shawn Flores

Thank you, Richard. First quarter adjusted EBITDA and adjusted earnings were $95 million and $42 million or $0.69 per share. The refining segment reported adjusted EBITDA of $81 million compared to $107 million in the fourth quarter of last year and why the Singapore index averaged $18.67 per barrel. And our landed crude differential was $6.60, resulting in a combined index of approximately $12 per barrel. Why margin capture was 116%, reflecting the benefits of elevated clean product freight and strong commercial execution.
Looking ahead to the second quarter, we expect our Hawaii crude differential to land between five and five 50 per barrel, and we have continued our product crack hedging framework with approximately 26% of our second quarter sales hedged at $20 per barrel. In billings, our Gulf Coast index averaged $21.34 per barrel. Margin capture was 65%, reflecting seasonally soft market conditions, upper Rockies, gasoline and diesel cracks relative to the Gulf Coast have rebounded quarter to date, improving by approximately $9 and $16 per barrel, respectively. Second quarter billings turnaround is expected to impact gross margin by $4 to $5 per barrel. And we expect operating costs to remain flat relative to the first quarter in Wyoming capture to the Gulf Coast index was 70%, reflecting similar seasonal dynamics as billings. Lower Rockies markets were particularly weak during the first quarter, reflecting strong refinery utilizations and softer demand in January, Rapid City gasoline spreads to the Gulf Coast have improved $10 per barrel quarter to date, and we are well positioned ahead of the peak summer season.
Lastly, in Washington, the PNW index averaged 2048 per barrel. During the first quarter, margin capture was 30%, including an approximate $2 per barrel impact from the plant or refinery outage.
Looking to Q2, our P and W indexes improved $7.50 per barrel quarter to date, driven by expanding gasoline margins in the region. For Logistics segment reported adjusted EBITDA of $28 million in the first quarter compared to $24 million in the fourth quarter, reflecting strong system utilization and lower operating costs.
Our retail segment reported adjusted EBITDA of $14 million in the first quarter compared to $17 million in the fourth quarter. Same store sales growth was partially offset by softer retail fuel margins due to rising wholesale prices, corporate expenses and adjusted EBITDA were $29 million in the first quarter compared to $26 million in the fourth quarter. First quarter expenses include $5 million related to advancing our renewable development activities with our pivot from the larger SCF and green hydrogen project in Tacoma, we expect our renewable spending to reduce to $2 million to $3 million per quarter for the remainder of the year. Cash provided by operations in the first quarter totaled $83 million, excluding a $44 million working capital outflow related to an increase in trade receivables and $13 million in turnaround expenditures. Cash used in investing activities totaled $23 million, primarily related to CapEx.
Total liquidity as of March 31st was $575 million, made up of $228 million in cash and $347 million in availability. We further reduced our cost of debt capital with the recent refinancing activities. In April, we repriced our $545 million term loan, reducing annual interest expense by $3 million. In March, we expanded the capacity of our asset base loan from $900 million to $1.4 billion as we plan to refinance our existing Hawaii intermediation with a combination of borrowings under the ABL and a smaller crude oil intermediation shift forward. Abl financing in Hawaii is expected to reduce working capital costs by $10 million annually with Hawaii gross margin improving by approximately $20 million per year, partially offset by a $10 million increase in annual interest costs.
Lastly, we've continued our opportunistic approach to share repurchases for $32 million during the first quarter and $73 million year to date at an average price of $34 per share. With strong balance sheet heading into the summer driving season, we are well-positioned to pursue our strategic growth objectives while opportunistically repurchasing our common stock at attractive prices.
This concludes our prepared remarks. Operator, we'll turn it to you for Q&A.

Question and Answer Session

Operator

We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If any time. A question has been addressed and you would like to withdraw your question, please press star then two. The first question comes from from Ryan Todd from Piper Sandler.

Ryan Todd

Great. Thanks. And then maybe if I could start, I mean, congratulations on the continued strong performance and why can you talk about what you're seeing in Asian markets, including the impact of clean tanker rates on acquired margins and any outlook from here in terms of how you see things progressing over the course of the year?

William Monteleone

Ryan, thanks for your comments as well. So I think the the key things that we're watching on the Singapore margins, and we continue to see it trade really in sympathy with Northwest Europe and ultimately barrels need to clear arbitrage from Asia into Europe. And so I think at the current time, that's the biggest factor. Ultimately, inventories are still on the lower side. And I think as we approach the summer driving season, you're going to see no large refining incentives to produce gasoline, which is going to ultimately compete with diesel.
And on the freight side, again, I think the biggest factor is ultimately the disruption in trade flows, both of Russian refined product exports as well as the need for refined product that is produced in the Middle East and India needs to as typically cleared through the Red Sea. It needs to take much longer routes to get to Europe. So I think ultimately, this comes down to geopolitics I don't see anything readily on the horizon that that suggests a change here. And so ultimately, I think you're in for a period of elevated refined product freight rates until we see stability. So again, I think that gives us some optimism among overall refined product cracks on both and Northwest Europe as well as in Singapore.

Ryan Todd

Great. Thanks. And then maybe on as we think about use of cash, I mean, you bought back quite a few shares in the quarter, probably more than we expected. Can you talk about how the drivers of that base, how you're thinking about shareholder returns going forward? And then maybe just high-level strategic priorities about how you're thinking about use of cash over the medium term?

William Monteleone

Sure. So I think ultimately, the share price cadence or the share repurchase cadence is really driven by an opportunistic approach of our forward outlook, liquidity to share price and our view of fundamental value and I think you'll see us continue to be opportunistic and that approach. And so in periods where you see share price weakness in our outlook to strong, you're going to see us be more aggressive and in periods of improving conditions are improving price, we'll probably buy less stock. So again, I think we'll continue to be opportunistic and we're share price sensitive I think broadly, as we think about capital allocation, we've strengthened our balance sheet, but we've got a lot of flexibility looking ahead. And so the question really is how do we want to invest in growth. And we look at share repurchases is really just another opportunity to invest in our own company. And we approach it dynamically as I suggested. In addition, I think we continue to pursue our strategic growth objectives, which include everything from C-store development to invest in our refineries to improve reliability in renewables and then strategic acquisitions to the extent that they fit and are attractively priced. And I'd say all that to say, we know from the past M&A experiences that carrying some excess liquidity allows us to be less reliant on capital markets and it ultimately drives enhanced shareholder returns. So again, we weigh all those things against our ultimately the opportunity to repurchase our stock at attractive prices. And it really how we think about our capital allocation framework.

Operator

The next question comes from Matthew Blair from Tudor, Pickering, Holt.

Matthew Blair

Great. Good morning. Thanks for taking my question. So your same-store retail, both volumes as well as merchandise revenue were quite impressive. How much would you attribute this to your your exposure to some unique markets, say and why versus how much would you attribute to your individual efforts in and retail?

William Monteleone

Sure, Matthew, we'll take a question. I think really this comes down to, I think, a mix of both our positioning and why. But also I think some strength we're seeing in our non non-brand. That's, again, all things considered relatively new. So it's a balanced contribution across the board. And I think the in-store piece. I think we're really just scratching the surface. We've got a relatively new leadership team on the retail side, and that's really driving some impressive in store and trends and so again, I would attribute some of the store base. And again, I think in the past, we've really been strong on the fuel side. And I think you're seeing us focus on the store, and I think that's beginning to yield results.

Matthew Blair

Sounds good. And then the follow-up is on M&A. Could you talk about the current landscape and your overall interest in acquiring, is there additional refineries or more retail stations? And then I guess from the flip side, is par open to being acquired? And if so, what does that mean for your considerable NOL position?

William Monteleone

Sure, Matthew. So I think and as we said in the past, our strategic focus really remains on Pad four and the upper reaches of pad five when we think about refining and logistics again, for a transaction to compete with our alternatives, it really needs to be an exceptional opportunity and it needs to present strong synergies with our existing operations. And so I think our strategic focus remains consistent on that front. And again, I think as it relates to opportunities for our NOL, I think we're down to about roughly $900 million of gross NOL value. It's still a very valuable asset and for us that shields our taxable income for the next several years. And ultimately, I think any future M&A activity where there we're acquiring are the target that the growth and we focus on maximizing shareholder value. And at the end of the day, we think about that as well as an asset. And we think about our future opportunities and the fundamental value of our business. And so wouldn't be appropriate to specifically comment on whether we would be or a target. But I think at the end of the day, we're focused on shareholder value.

Matthew Blair

Sounds good. And thanks for your comments.

Operator

Next question comes from Neil Mehta from Goldman Sachs.

Neil Mehta

So the first question is just on Asia margins. Have certainly softened up but out there. And a lot of that seems like we're towards run cut levels in the region. Would just love your perspective on how you see the Asian market playing out? And then how do you see Hawaii basis trading trending relative to Asia as we get our way into the summer?

William Monteleone

Sure. Thanks, Neal. I tend to agree with your assessment that as we're kind of approaching a Singapore crack or through one to $12, you look at the secondary products out there like naphtha and fuel oil net of simpler refiners in Asia are approaching negative gross margin levels. So again, I think from that perspective, again, I think that supply-side supporting exists again, I think our view is the marginal barrel still needs to clear from Asia to Europe as you approach the summer. And I think that you'll ultimately see and that trend reemerge. And when you think about that given where the freight market is, it's quite expensive. And so you're going to see I think ultimately products continue to flow in that direction.
As it relates to Hawaii, again, I think the marginal barrel that lies still imported and freight is a major factor. And so again, as we think about the Hawaii basis and our local capture rates on refined product freight and the trends there remain elevated. I think we've continued to see refined product freight costs trade in the yes, between eight and $10 per barrel range, which is consistent to where they've been over the last several quarters.

Neil Mehta

Yes, thanks, Will. And the follow-up is just that you could spend a little bit more time on the Rockies. I think you did allude to the fact it was a softer start to the quarter, but things seem to be moving in the right direction in the region. So just your perspective on how much of that was transient and what we should carry into 2Q? Thank you.

William Monteleone

Sure. Yes. I mean, I think Sean referenced this and again, we saw some strong utilization rates for the pad for refining complex in the first quarter. It's really the first time in a while. That's been the case. And I think and on top of that, we saw I'd say steady improvement with really been a pretty substantial trough in January with steady improvement as we move through the first quarter. So and again, I think that signals a little bit of rebalancing that was happening. And again, the steady upward trends continue, Neil, as we've moved into through April and into May. So again, I would really point to some of the weakness has been a January specific of that.

Neil Mehta

Thank you.

Operator

The next question comes from John Royall from JPMorgan.

John Royall

Good morning. Thanks for taking my question. Some could you go into some detail on the pivot you called out at Tacoma on the renewable side? What's the new scope of the work? And is the green hydrogen project effectively off the table here, John, it's Will.

William Monteleone

So I think at a high level, we've spent significant effort and scoping this project. And given the policy backdrop and also really where the renewables environment sits. We think a lot larger capital kind of higher risk project is more difficult to fund today and more difficult and doesn't generate the types of returns that we think are necessary for our project in this area. And And so again, I think I've talked about renewables in the past and our view on investing there. And again, ultimately, we think the returns there need to be at or of the way we think about investing in our conventional fuel business and so on.
Yes, I think that's really the backdrop for the change and the green hydrogen project pairs with the SAF projects. And so again, I think that's currently been deferred. And then as we think about the scope of work again, I think we're looking at the advantages we have in a coma logistically again, we've got great rail access, significant tankage, deepwater capabilities and ultimately thinking about the right way to utilize our logistics assets that we are prepared to either distribute and or produce lower carbon fuels in the future.

John Royall

That's helpful. Thank you. And then on the intermediation facility in Hawaii, just so we understand is the savings there, just from less inventories being encompassed under the new deal given its crude only? And how does that come at the cost of carrying more inventories on your balance sheet? And should we think of this as a step towards eventually going to no intermediation agreement and reducing your finance costs even further? Or should we think of this as kind of more of a necessity for your Hawaii business longer term?

Shawn Flores

As John and John, I think the drivers of the savings that we called out of $10 million a year is really of the actual cost of the facility vis-a-vis the AVL and not necessarily the fact that we're equity funding more inventory. In fact, I would signal a big shift in the amount of inventory that were equity funding. But on, I think the right way to think about it is about 200 to 300 basis points of savings shifting from intermediation state BL.'s?
I think on the question of whether this is just a step in duration of funding our Hyve business exclusively with ABL.s I think at this time, we see some benefits in ammunition financing as it relates to our crude. Obviously, we have a complex supply chain with cargoes on the water, and we think that the intermediation facility provides a good solution there. But ultimately, we'll evaluate that as our liquidity position improves over the years. And whether it makes sense to shift, it's completely towards APL.

Operator

Your next question comes from Jason Gabelman from TD Cowen.

Jason Gabelman

Yes, thanks for taking my questions. On order ask about the upcoming month, can I mean this on, can you just remind us what the scope of work is? And then given it's your first maintenance event since acquiring the plant and you previously alluded to on some eventual improvement and operations. Should we expect to see any of that come after you come out of turnaround relative to where it was performing prior to turnaround?

William Monteleone

Sure, Jason. It's well I assume you mean the upcoming turnaround, the means of April activity we've referenced. So this was largely, as Richard pointed out on the crude unit reformer and several hydrotreaters. And we have and again, as Richard referenced, again, moving of course, restart activities there. Again, the intent of conducting this activity during the period was to position us to run at the optimum and ultimately the not elevated rates during the summer season. So again, our plan is to again push rates as we come out of turnaround and into the third quarter. And obviously, the focus in Montana is to, again drive reliability. And again, this really comes down to ensuring that again, we limit the process safety risks that are in the plant and ultimately position us to optimize throughput and focus on reliability and process safety. And that if we can do that, I think we've already demonstrated in mechanical availability to run the plant into the low 60s. So again, I think that's our focus and again, not easy to do. But again, I think we've got a really strong team and that's certainly out the top priority.

Jason Gabelman

Got it. And then can you just remind us sitting on the balance sheet, what's the target on cash level is for you guys and or overall liquidity.

Shawn Flores

As Jason has shown, I think our minimum liquidity targets are really dynamic based on upcoming turnaround events and discretionary CapEx outlook and nondiscretionary CapEx. And so I think that will fluctuate over time depending on upcoming turnaround events. Historically, we signaled pre billings that our minimum liquidity was in the $200 million range safe to assume that that is higher given the expanded business. But needless to say, we've strengthened the balance sheet to a point where we've got excess liquidity. And I think from this point, any additional liquidity will be allocated towards our strategic growth objectives and creating shareholder value with share repurchases.

Jason Gabelman

Okay, thanks.

Operator

As a reminder, if you have a question, please press star one next question comes from Manav Gupta from UBS.

Manav Gupta

Hitting in your prepared remarks, you indicated that the Pacific Northwest crack has moved up and that's primarily driven by the strength of gasoline. And I was just wondering if you could help us understand between the three regions where you're seeing in terms of relative product strength. Where were you seeing gasoline, the strongest or jet fuel, the strongest and our diesel vehicles strong. If you could just help us walk and understand how the dynamics of the three 3Q projects are looking in the three regions fair amount of that.

William Monteleone

So I think to start with why I think again, it's really going to be driven by waterborne dynamics. And again, I think we're seeing on strength on the Asian gasoline market and again, particularly for octane, and that I think is going to ripple through into refining production plants. So again, I think that's broadly speaking what I would point out ahead of the summer season, as you look at the Pacific Northwest, definitely seeing regional strength on the gasoline side, I think several of the California Northern California refineries that have converted to renewables production are bringing in significant amounts of imports. And that's, I think, impacting the know the overall clearing price for gasoline.
On the flip side, I think diesel on the West Coast is weaker relative to historical conditions and seeing more exports out of the West Coast to rebound market as renewables are coming in and then as you shift them on into the Rockies, again, I think it's going to remain a very a hyper seasonal business, still see strong demand for diesel and seeing typical seasonal rebound in gasoline demand. So again, I think overall, we've seen good product demand across our our system.

Manav Gupta

Thank you for taking my questions.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Will mark Tellium, President and Chief Executive Officer, for closing remarks.

William Monteleone

Thank you all for joining us this morning. I believe the future of this enterprise is bright, and we are well positioned to grow our earnings as we enhance and optimize the business we have built over the last 10 years and a great day.

Operator

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