PARR Par Pacific Holdings Inc

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Delaware		1-36550		84-1060803
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

825 Town & Country Lane, Suite 1500 Houston, Texas		77024
(Address of principal executive offices)		(Zip Code)

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Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	PARR	New York Stock Exchange

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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(a)	Financial Statements of Business Acquired.

(b)	Pro Forma Financial Information.

(c)	Shell Company Transactions.

(d)

Exhibits.

2.1

Equity and Asset Purchase Agreement dated as of October 20, 2022, by and among Exxon Mobil Corporation, ExxonMobil Oil Corporation and ExxonMobil Pipeline Company, LLC, as sellers, and Par Montana, LLC, Par Montana Holdings, LLC, as purchaser entities, and solely for the limited purposes set forth therein, Par Pacific Holdings, Inc. Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on October 21, 2022. @

2.2

First Amendment to Equity and Asset Purchase Agreement dated as of June 1, 2023, by and among Exxon Mobil Corporation, ExxonMobil Oil Corporation and ExxonMobil Pipeline Company, LLC, as sellers, and Par Montana, LLC, Par Montana Holdings, LLC, and Par Rocky Mountain Midstream, LLC, as purchaser entities, and solely for the limited purposes set forth therein, Par Pacific Holdings, Inc. Incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed on June 1, 2023.

10.1

Asset-Based Revolving Credit Agreement, dated as of April 26, 2023, by and among Par Pacific Holdings, Inc., as Holdings, Par Petroleum, LLC, Par Hawaii, LLC, Hermes Consolidated, LLC, Wyoming Pipeline Company LLC, Par Montana, LLC and Par Rocky Mountain Midstream, LLC, as Borrowers, Wells Fargo Bank, National Association, as Agent, Issuing Bank, and Swing Lender, the lenders party thereto, as the Lenders, and the other issuing banks party thereto, as Issuing Banks, and Wells Fargo Bank, National Association, Bank of America, N.A., Goldman Sachs Bank USA, MUFG Bank, LTD and Fifth Third Bank, National Association, as Joint Lead Arrangers and Joint Bookrunners. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 2, 2023. @

10.2

First Amendment to Asset-Based Revolving Credit Agreement, dated as of May 30, 2023, by and among Par Pacific Holdings, Inc., as Holdings, Par Petroleum, LLC, Par Hawaii, LLC, Hermes Consolidated, LLC, Wyoming Pipeline Company LLC, Par Montana, LLC and Par Rocky Mountain Midstream, LLC, as Borrowers, Wells Fargo Bank, National Association, as Agent, Issuing Bank, and Swing Lender, the lenders party thereto, as the Lenders, and the other issuing banks party thereto, as Issuing Banks, and Wells Fargo Bank, National Association, Bank of America, N.A., Goldman Sachs Bank USA, MUFG Bank, LTD and Fifth Third Bank, National Association, as Joint Lead Arrangers and Joint Bookrunners. Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 1, 2023. @

23.1	Consent of PricewaterhouseCoopers LLP.

99.1	News Release dated June 1, 2023. Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on June 1, 2023.

99.2	Audited combined financial statements of the Billings Refinery and Associated Logistics Business as of and for the years ended December 31, 2022 and 2021.

99.3	Unaudited condensed combined financial statements of the Billings Refinery and Associated Logistics Business for the quarterly period ended March 31, 2023 and March 31, 2022.

99.4	Unaudited pro forma condensed consolidated combined financial information of Par Pacific Holdings, Inc. and its subsidiaries for the six months ended June 30, 2023 and for the year ended December 31, 2022.

104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

@	Schedules to and portions of this exhibit have been omitted pursuant to Item 601(a)(5) and (b)(2)(ii) of Regulation S-K. The Company hereby undertakes to supplementally furnish copies of any omitted schedules to and portions of this exhibit to the Securities and Exchange Commission upon request.

	PAR PACIFIC HOLDINGS, INC.
	By:	/s/ Jeffrey R. Hollis
		Jeffrey R. Hollis
		Senior Vice President, General Counsel, and Secretary

Exhibit 23.1

 

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-192519, 333-195662, 333-204597, 333-212107, 333-213471, 333-214593, 333-228933, 333-229278 and 333-262690) and on Form S-8 (Nos. 333-185612, 333-208575, 333-216518, 333-225054, 333-256130 and 333-272857) of Par Pacific Holdings, Inc. of our report dated May 25, 2023, relating to the financial statements of Billings Refinery and Associated Logistics Business, which appears in this Current Report on Form 8-K.

 

 

 

/s/ PricewaterhouseCoopers LLP

 

Dallas, TX

August 14, 2023

Exhibit 99.2

 

Billings Refinery & Associated Logistics Business

 

Combined Financial Statements

 

As of and for the years ended December 31, 2022 and 2021

 

 

TABLE OF CONTENTS

 

	Page
Report of Independent Auditors	3
Combined Balance Sheets as of December 31, 2022 and 2021	5
Combined Statements of Income for the years ended December 31, 2022 and 2021	6
Combined Statements of Net Parent Company Investment for the years ended December 31, 2022 and 2021	7
Combined Statements of Cash Flows for the years ended December 31, 2022 and 2021	8
Notes to Combined Financial Statements	9

 

 

Report of Independent Auditors

 

To the Management of Exxon Mobil Corporation

 

Opinion

 

We have audited the accompanying combined financial statements of Billings Refinery & Associated Logistics Business (the "Business"), which comprise the combined balance sheets as of December _{31, 2022} and _2021, and the related combined statements of income, of net parent company investment, and of cash flows for the years then ended, including the related notes (collectively referred to as the "combined financial statements").

 

In our opinion, the accompanying combined financial statements present fairly, in all material respects, the financial position of the Business as of December _{31, 2022} and _2021, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

We conducted our audit in accordance with auditing standards generally accepted in the United States of America (US GAAS). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Combined Financial Statements section of our report. We are required to be independent of the Business and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Emphasis of Matter

 

As discussed in Note 6 to the combined financial statements, the Business has entered into significant transactions with Exxon Mobil Corporation and its affiliates, which are related parties. Our opinion is not modified with respect to this matter.

 

Responsibilities of Management for the Combined Financial Statements

 

Management is responsible for the preparation and fair presentation of the combined financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of combined financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the combined financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Business's ability to continue as a going concern for one year after the date the combined financial statements are available to be issued.

 

Auditors' Responsibilities for the Audit of the Combined Financial Statements

 

Our objectives are to obtain reasonable assurance about whether the combined financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with US GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the combined financial statements.

 

PricewaterhouseCoopers LLP, 1000 Louisiana Street, Suite 5800, Houston, TX 77002

T: (713) 356 4000, F: (713) 356 4717, www.pwc.com/us

 

 

 

In performing an audit in accordance with US GAAS, we:

 

•

Exercise professional judgment and maintain professional skepticism throughout the audit.

•

Identify and assess the risks of material misstatement of the combined financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the combined financial statements.

•

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Business's internal control. Accordingly, no such opinion is expressed.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the combined financial statements.

•

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Business's ability to continue as a going concern for a reasonable period of time.

 

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

 

 

Houston, Texas

May 25, 2023

 

 

BILLINGS REFINERY & ASSOCIATED LOGISTICS BUSINESS

 

COMBINED BALANCE SHEETS

(in thousands)

 

		December 31, 2022				December 31, 2021
Assets
Current assets:
Accounts receivable, net		$	50,489			$	30,866
Inventories			248,386				298,558
Prepaid expenses and other current assets			1,775				2,113
Total current assets			300,650				331,537
Investments			61,643				57,868
Property, plant, & equipment, net			303,688				312,067
Other assets, net			10,128				12,341
Total assets		$	676,109			$	713,813
Liabilities
Current liabilities:
Accounts payable			47,317				36,303
Accrued liabilities			129,307				96,375
Due to related parties			143,273				131,657
Total current liabilities			319,897				264,335
Deferred income tax liabilities			66,583				69,126
Total liabilities			386,480				333,461
Net parent company investment
Net parent company investment			289,629				380,352
Total liabilities and net parent company investment			676,109				713,813

 

The accompanying notes are an integral part of these Combined Financial Statements.

 

 

 

BILLINGS REFINERY & ASSOCIATED LOGISTICS BUSINESS

 

COMBINED STATEMENTS OF INCOME

(in thousands)

 

		Year Ended				Year Ended
Revenues and other income		December 31, 2022				December 31, 2021
Sales and other operating revenue		$	2,798,249			$	2,171,259
Income from equity affiliates			18,204				21,235
Total revenues and other income			2,816,453				2,192,494
Costs and other deductions
Crude oil and product purchases - related party			(2,292,634	)			(1,726,276	)
Production and manufacturing expenses			(324,686	)			(271,861	)
Selling, general and administrative expenses			(40,878	)			(35,827	)
Depreciation expense			(22,633	)			(22,315	)
Other taxes and duties			(1,894	)			(2,176	)
Total costs and other deductions			(2,682,725	)			(2,058,455	)
Income before income taxes			133,728				134,039
Income taxes			(34,121	)			(32,107	)
Net income		$	99,607			$	101,932

 

The accompanying notes are an integral part of these Combined Financial Statements.

 

 

BILLINGS REFINERY & ASSOCIATED LOGISTICS BUSINESS

 

COMBINED STATEMENTS OF NET PARENT COMPANY INVESTMENT

(in thousands)

 

		Net Parent Company Investment
Balance at December 31, 2020		$	357,124
Net income			101,932
Net transfers to Parent			(78,704	)
Balance at December 31, 2021		$	380,352
Net income			99,607
Net transfers to Parent			(190,330	)
Balance at December 31, 2022		$	289,629

 

 

The accompanying notes are an integral part of these Combined Financial Statements.

 

 

BILLINGS REFINERY & ASSOCIATED LOGISTICS BUSINESS

 

COMBINED STATEMENTS OF CASH FLOWS

(in thousands)

 

		Year Ended December 31, 2022				Year Ended December 31, 2021
Operating activities:
Net Income		$	99,607			$	101,932
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			22,633				22,315
Deferred income taxes			(2,543	)			2,450
Other non-cash items, net			223				(210	)
Dividends received less than equity in current earnings of equity companies			(3,775	)			(5,498	)
Change in assets and liabilities:
Accounts receivable			(19,848	)			(8,030	)
Inventory			50,173				(120,241	)
Prepaid expenses and other current assets			339				(269	)
Other assets			2,213				(2,432	)
Accounts payable			11,014				19,387
Accrued liabilities			32,932				48,453
Due to related parties			11,616				35,178
Net cash provided by operating activities			204,584				93,035
Investing activities:
Purchases of property and equipment			(13,436	)			(9,033	)
Other investing activities, net			(818	)			(5,298	)
Net cash used in investing activities			(14,254	)			(14,331	)
Financing activities:
Net transfers to Parent			(190,330	)			(78,704	)
Net cash used in financing activities			(190,330	)			(78,704	)
Net increase (decrease) in cash and cash equivalents			-				-
Cash and cash equivalents at beginning of period			-				-
Cash and cash equivalents at end of period		$	-			$	-

 

The accompanying notes are an integral part of these Combined Financial Statements.

 

 

BILLINGS REFINERY & ASSOCIATED LOGISTICS BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS

 

1.	DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Description of Business

 

On October 20, 2022, ExxonMobil Corporation (referred to as “ExxonMobil” or “Parent”) entered into a definitive agreement to sell its Billings Refinery & Associated Logistics Business (collectively the “Business”) to Par Pacific Holdings. The Business is a fully integrated fuels value chain, deriving value along the entire chain from the sourcing of crude oil to refining, distributing, and marketing of fuels to its customers, which includes operations in the states of Montana, Wyoming, Idaho, Utah, eastern Washington, and the Dakotas. The Business operates a high-conversion, complex 63,000 barrels per day (“bpd”) refinery in Billings, Montana, which processes low-cost Western Canadian and regional Rocky Mountain crude oil grades. In addition to the refinery, the Business owns a 65% interest in an adjacent cogeneration facility and an expansive Petroleum Administration for Defense Districts (“PADD”) IV & V marketing and logistics network. The logistics assets include the wholly-owned 70-mile, 55,000 bpd Silvertip Pipeline, a 40% interest in the 750-mile, 65,000 bpd Yellowstone refined products pipeline, and seven refined product terminals. Total storage capacity across the refinery and logistics locations totals 4.1 million barrels (“MMbbls”).

 

Basis of Presentation

 

These Combined Financial Statements were prepared on a stand-alone basis and have been derived from the Consolidated Financial Statements and accounting records of ExxonMobil. The Business has not operated as a separate stand-alone legal entity and is comprised of certain wholly-owned subsidiaries and other component operations of ExxonMobil. These Combined Financial Statements are presented as carve-out financial statements and reflect the combined historical results of operations, financial position, comprehensive loss and cash flows of the Business for the periods presented as historically managed within ExxonMobil in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”). The Combined Financial Statements may not be indicative of the Business’s future performance and do not necessarily reflect what the financial position, results of operations, and cash flows would have been had it operated as a stand-alone company during the periods presented.

 

All intracompany transactions have been eliminated. All intercompany transactions between the Business and ExxonMobil have been included in these Combined Financial Statements. For those transactions between the Business and ExxonMobil that are historically settled in cash, the Business has reflected such balances in the Combined Balance Sheet as “Due to related parties”. The aggregate net effect of such transactions that are not historically settled in cash has been reflected in the Combined Balance Sheet as “Net parent company investment” and in the Combined Statements of Cash Flows as a financing activity.

 

ExxonMobil utilizes a centralized treasury management function for financing its operations. The Business did not maintain separate bank accounts. The cash generated and used by our operations is deposited to ExxonMobil’s centralized accounts, which are commingled with the cash of other entities controlled by the ExxonMobil. The cash and cash equivalents held by ExxonMobil have not been assigned to the Business for any of the periods presented, as the balances are not directly attributable to the Business. The Business reflects transfers of cash to and from ExxonMobil’s cash management system as a component of “Net parent company investment” in the Combined Balance Sheet. ExxonMobil’s third-party long-term debt and the related interest expense have not been allocated to the Business for any of the periods presented as the Business was not the legal obligor of such debt.

 

Historically, ExxonMobil and its affiliates provide a variety of services to the Business. The Combined Statements of Income includes expense allocations for services and certain support functions that are provided on a centralized basis within Parent such as treasury, accounting, human resources, and legal services. These allocations were based on direct usage when identifiable, with the remainder allocated on a basis of the percentage of operating expenses, the percentage of production capacity or headcount. The Business believes the basis from which the expenses have been allocated are a reasonable reflection of the utilization of services provided to, or the benefit received by, the Business during the periods presented. These allocated amounts, however, are not necessarily indicative of the actual amounts that might have been incurred or realized had the Business operated as a separate stand-alone entity during the periods presented. Consequently, these Combined Financial Statements do not necessarily represent the results the Business would have achieved if we had operated as a separate stand- alone entity from ExxonMobil during the periods presented. Refer to Note 6, “Related Party Transactions and Net Parent Company Investment” for additional information.

 

 

BILLINGS REFINERY & ASSOCIATED LOGISTICS BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS

 

The accompanying Combined Financial Statements have been prepared assuming the Business will continue as a going concern which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.

 

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of combination

 

The Business operates across many affiliates within ExxonMobil. All intercompany accounts and transactions occurring solely within the Business have been eliminated from the accompanying Combined Financial Statements. All intercompany accounts and transactions occurring between the Business and another ExxonMobil business have been included in the accompanying Combined Financial Statements and the Business has taken the assumption that all of these transactions have been settled in cash.

 

Use of Estimates

 

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of the Combined Financial Statements and the reported amounts of revenues and expenses during the reporting periods. Actual results can differ from those estimates. The methods used in developing accounting estimates have been consistently applied in the periods presented.

 

Revenue Recognition

 

The Business generally sells crude oil and petroleum products under short-term agreements at prevailing market prices. Revenue is recognized at point in time at the amount the Business expects to receive when the customer has taken control, which is typically when title transfers and the customer has assumed the risks and rewards of ownership. Payment for revenue transactions is typically due within 30 days. Future volume delivery obligations that are unsatisfied at the end of the period are expected to be fulfilled through ordinary production or purchases. These performance obligations are based on market prices at the time of the transaction and are fully constrained due to market price volatility.

 

Purchases and sales of inventory with the same counterparty that are entered into in contemplation of one another are combined and recorded as exchanges measured at the book value of the item sold.

 

“Sales and other operating revenue” and “Accounts receivable” primarily arise from contracts with customers. Contract assets are mainly from marketing assistance programs provided to customers in exchange for a long-term commitment to purchase products over a future period of time. Contract liabilities are mainly accruals of volume discounts.

 

The Business had one customer representing 22% and 21% of revenue for the years ended December 31, 2022 and 2021, respectively.

 

Fair Value of Financial Instruments

 

Due to their short-term nature, the carrying amounts reported in the accompanying Combined Financial Statements approximate the fair value for accounts receivable, accounts payable and accrued expenses. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Hierarchy levels 1, 2 and 3 are terms for the priority of inputs to valuation techniques used to measure fair value. Hierarchy level 1 inputs are quoted prices in active markets for identical assets or liabilities. Hierarchy level 2 inputs are inputs other than quoted prices included within level 1 that are directly or indirectly observable for the asset or liability. Hierarchy level 3 inputs are inputs that are not observable in the market.

 

 

BILLINGS REFINERY & ASSOCIATED LOGISTICS BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS

 

Cash and Financing Activities

 

ExxonMobil uses a centralized approach to the cash management and financing of the Business’s operations. No cash has been attributed to the Business for any of the periods presented, as the cash balances are not directly attributable to the Business. The cash generated by its operations is either directly received by or transferred to other ExxonMobil affiliates. ExxonMobil funded the Business’s operating and investing activities as needed. Therefore, the Business did not have a cash balance as of December 31, 2022 or 2021. The Business reflects cash management and financing activities performed by ExxonMobil as a component of the change in “Net parent company investment” on its accompanying Combined Balance Sheet, and as a “Net transfers to parent” on its accompanying Combined Cash Flows. The Business has not included any interest expense related to funding activities, since historically ExxonMobil has not allocated long-term debt or interest related to such activity with any of its business segments.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Trade and other receivables are recorded at their transaction amounts less allowance for doubtful accounts. Due to their short term nature, the valuation approximates its fair value. Allowance for doubtful accounts are recorded to the extent that there is likelihood that any of the amounts due will not be collected, which are not significant. The Business had one customer and four other customers representing 23% and 55% of trade accounts receivable as of December 31, 2022 and 2021, respectively.

 

Inventories

 

Crude oil and petroleum product inventories are stated at the lower of cost or market, and costs are determined using the first‑in, first‑out (“FIFO”) method. The method differs to that of the Parent who uses last-in, last-out (“LIFO”). The business believes that this method is preferable as it improves comparability with a majority of the business’s peers. Inventory costs include expenditures and other charges (including depreciation) directly and indirectly incurred in bringing the inventory to its existing condition and location. Selling expenses and general and administrative expenses are reported as period costs and excluded from inventory cost. Inventories of materials and supplies are valued at cost or less.

 

Property, Plant and Equipment

 

Property, plant and equipment are recorded at cost and depreciated on a straight-line basis over the estimated useful lives of the assets, which ranges from 5 to 25-years for machinery and equipment and 30 to 50 years for buildings. Maintenance and repairs, including planned major maintenance, are expensed as incurred. Major renewals and improvements are capitalized and the assets replaced are retired.

 

In accordance with Accounting Standards Codification (ASC) 360, “Property, Plant, and Equipment” (ASC 360), the Business assesses the recoverability of the carrying value of its property, plant and equipment whenever events or changes in circumstances indicate that the carrying amount of the asset group may not be recoverable. Recoverability is measured by a comparison of the carrying amount of an asset group to the future net undiscounted cash flows expected to be generated by the asset group. If the undiscounted cash flows are less than the carrying amount of the asset group, an impairment loss is recognized for the amount by which the carrying value of the asset group exceeds the fair value of the asset group. There were no impairments during the periods presented.

 

Asset Retirement Obligations

 

The Business is subject to retirement obligations for certain assets. The fair values of these obligations are recorded as liabilities on a discounted basis, which is typically at the time the assets are installed. In the estimation of fair value, the Business uses assumptions and judgments regarding such factors as the existence of a legal obligation for an asset retirement obligation, technical assessments of the assets, estimated amounts and timing of settlements, discount rates, and inflation rates. Asset retirement obligations for the Business’s facilities generally become firm at the time the facilities are permanently shut down and dismantled. These obligations may include the costs of asset disposal and additional soil remediation. However, the Business’s sites generally have indeterminate lives based on plans for continued operations and as such, the fair value of the conditional legal obligations cannot be measured, since it is impossible to estimate the future settlement dates of such obligations.

 

 

BILLINGS REFINERY & ASSOCIATED LOGISTICS BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS

 

Accounting for Investments

 

The Combined Financial Statements include the accounts of certain subsidiaries the Business controls. Amounts representing the Business’s interest in entities that it does not control, but over which it exercises significant influence, are included in “Investments” in the Combined Balance Sheet. The Business’s share of the net income of these companies is included in the Combined Statements of Income caption “Income from equity affiliates”.

 

Majority ownership is normally the indicator of control that is the basis on which subsidiaries are consolidated. However, certain factors may indicate that a majority-owned investment is not controlled and therefore should be accounted for using the equity method of accounting. These factors occur where the minority shareholders are granted by law or by contract substantive participating rights. These include the right to approve operating policies, expense budgets, financing and investment plans, and management compensation and succession plans.

 

Investments in equity companies are assessed for possible impairment when events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. Examples of key indicators include a history of operating losses, negative earnings and cash flow outlook, and the financial condition and prospects for the investee’s business segment. If the decline in value of the investment is other than temporary, the carrying value of the investment is written down to fair value. In the absence of market prices for the investment, discount cash flows are used to assess fair value.

 

As of December 31, 2022 and 2021, the Business had equity investments of $61.6 million and $57.9 million, respectively. These investments relate to the Business’s 40% ownership interest in the 65,000 bpd Yellowstone refined products pipeline, and its 65% ownership interest in a cogeneration facility and an expansive PADD IV & V marketing and logistics network.

 

Income Taxes

 

The Business’s operations are subject to U.S. federal, and state and local income taxes. In preparing these Combined Financial Statements and to the extent the Company has historically been included in the ExxonMobil income tax returns, the Business believes current and deferred income taxes should be presented in a manner that is systematic, rational and consistent with the asset and liability method prescribed by FASB ASC 740. Accordingly, the Business has prepared its tax provision for operations following a separate return method. The separate return method applies ASC 740 to the Combined Financial Statements on the basis the Business was a separate taxpayer. As a result, the tax treatment of certain items reflected in the Combined Financial Statements may not be reflected in the Consolidated Financial Statements and tax returns of ExxonMobil. Therefore, such items as net operating losses, credit and other similar loss carryforwards, and other deferred taxes may exist in the Combined Financial Statements that may not exist or will differ from the amounts reported in ExxonMobil’s Consolidated Financial Statements.

 

Since the Business’s results were previously included in ExxonMobil’s U.S. consolidated and combined income tax returns where applicable, payments to certain tax authorities were made by ExxonMobil and not by the Business. For tax jurisdictions where the Business is included with ExxonMobil in a consolidated tax filing, we do not maintain taxes payable to or from ExxonMobil and the payments are deemed settled immediately with the legal entities paying the tax in the respective tax jurisdictions through changes in net stockholders’ investment.

 

In determining the annual effective income tax rate, the Business analyzes various factors, including the Business’s annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes and the ability of the Business to use tax credits and net operating loss carryforwards.

 

Deferred income tax assets and liabilities are determined based on temporary differences between the financial reporting bases and the tax bases of assets and liabilities. Deferred income tax assets are also recognized for tax net operating loss carryforwards. These deferred income tax assets and liabilities are measured using the enacted tax rates and laws that will be in effect when such amounts are expected to be reversed or utilized. Valuation allowances are provided to reduce such deferred income tax assets to amounts more likely than not to be ultimately realized.

 

 

BILLINGS REFINERY & ASSOCIATED LOGISTICS BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS

 

The Business assesses uncertain tax positions in accordance with income tax accounting standards. Under these standards, income tax benefits should be recognized when, based on the technical merits of a tax position, the Business believes that if a dispute arose with the taxing authority and were taken to a court of last resort, it is more likely than not (i.e., a probability of greater than 50 percent) that the tax position would be sustained as filed. If a position is determined to be more likely than not of being sustained, the reporting enterprise should recognize the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with the taxing authority. The Business’s practice is to recognize interest and penalties related to income tax matters in income tax expense.

 

Defined Benefit Pension Plans and Other Employee Benefits

 

The Business’s employees participate in ExxonMobil’s defined benefit pension plans, which are offered to certain ExxonMobil employees. For purposes of the accompanying Combined Financial Statements, the Business accounts for its participation in these shared plans using the multiemployer approach under Topic 715 of the Accounting Standards Codification. As a participant in multiemployer benefit plans, the Business recognizes as expense a direct charge from ExxonMobil based on employees directly involved with the Business, and the Business does not recognize any employee benefit plan assets or liabilities in the accompanying Combined Balance Sheet.

 

Net Parent Company Investment

 

The Business’s equity on the Combined Balance Sheet represents ExxonMobil’s net investment in the Business, the accumulated net earnings after taxes and the net effect of the transactions with and allocations from ExxonMobil. Refer to Note 6, “Related Party Transactions and Net Parent Company Investment” for additional information.

 

3.	RECENTLY ISSUED ACCOUNTING STANDARDS

 

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in the accounting standards. The amendments in the ASU include removal of certain exceptions to the general principles in Topic 740 related to recognizing deferred taxes for investments, performing intraperiod tax allocation and calculating income taxes in an interim period. The ASU also clarifies and simplifies other aspects of the accounting for income taxes, including the recognition of deferred tax liabilities for outside basis differences. The amendments in this ASU are effective for annual periods in fiscal years beginning after December 15, 2020, and interim periods therein. Early adoption is permitted. The Business adopted this accounting standard on January 1, 2021 with no material impact to the Combined Financial Statements.

 

4.	PROPERTY, PLANT, AND EQUIPMENT

 

Property, plant, and equipment at December 31, 2022 and 2021 consists of the following:

 

		December 31, 2022				December 31, 2021
		(In thousands)
Machinery & equipment		$	666,761			$	656,966
Buildings			51,756				50,093
Assets under construction			13,290				11,309
Other			1,511				1,510
Total property, plant, and equipment			733,318				719,878
Accumulated depreciation			(429,630	)			(407,811	)
Property and equipment, net		$	303,688			$	312,067

 

Depreciation expense related to property and equipment for the years ended December 31, 2022 and 2021 was $22.6 million and $22.3 million, respectively.

 

 

BILLINGS REFINERY & ASSOCIATED LOGISTICS BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS

 

5.	INVENTORIES

 

 

		December 31, 2022				December 31, 2021
		(In thousands)
Crude oil		$	55,420			$	78,434
Petroleum products			167,805				200,297
Material and Supplies			25,161				19,827
Total		$	248,386			$	298,558

 

6.	RELATED PARTY TRANSACTIONS AND NET PARENT COMPANY INVESTMENT

 

 

 

 

 

 

		December 31, 2022				December 31, 2021
		(In thousands)
Production and manufacturing expenses		$	37,013			$	35,226
Selling, general and administrative expenses			14,522				13,427
Total corporate allocations		$	51,535			$	48,653

 

 

 

 

BILLINGS REFINERY & ASSOCIATED LOGISTICS BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS

 

Net Parent Company Investment

 

The net transfers to the Parent are included within “Net parent company investment” on the Combined Statements of Net Parent Company Investment The components of the transfers to Parent were as follows:

 

		December 31, 2022				December 31, 2021
			(In thousands)
Cash pooling and general financing activities, net of purchases from related parties		$	(278,529	)		$	(157,014	)
Corporate allocations			51,535				48,653
Income taxes			36,664				29,657
Total net transfers to Parent			(190,330	)			(78,704	)

 

Accrued liabilities consist of the following:

 

7.	ACCRUED LIABILITIES

 

		December 31, 2022				December 31, 2021
			(In thousands)
Federal RINs liabilities		$	110,989			$	73,500
Accrued taxes other than income			15,865				18,055
Contract liabilities			804				1,095
Accrued compensation			1,649				3,725
Accrued liabilities		$	129,307			$	96,375

 

8.	COMMITMENTS AND CONTINGENCIES Litigation

 

Litigation

 

The Business can be subject to claims and complaints that may arise in the ordinary course of business. Management has regular litigation reviews, including updates from ExxonMobil, to assess the need for accounting recognition or disclosure of these contingencies. The Business would accrue an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated. If a range of amounts can be reasonably estimated and no amount within range is a better estimate than any other amount, then the minimum of the range is accrued. The Business wouldn’t record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated or when the liability is believed to be only reasonably possible or remote. For contingencies where an unfavorable outcome is reasonably possible and which are significant, the Business would disclose the nature of the contingency and, where feasible, an estimate of the reasonably possible loss. For purposes of the contingency disclosures, “significant” includes material matters as well as other matters which management believes should be disclosed. Based on a consideration of the process described, the Business does not have any material loss contingencies.

 

Commitments

 

During the normal course of business, in order to manage its refining process, the Parent enters into certain long-term agreements with third parties. The Parent’s purchase obligations, as part of these agreements, include commitments to engage a third party to process hydrogen sulfide into sweet fuel gas, and to discharge process wastewater into the treatment systems of local municipalities.

 

 

BILLINGS REFINERY & ASSOCIATED LOGISTICS BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS

 

As of December 31, 2022, expected payments for purchase commitments directly attributable to the Business are:

 

		Amount
		(In thousands)
2023		$	10,379
2024			10,379
2025			3,461
2026			378
2027			378
Thereafter			1,470
Total		$	26,445

 

9.	INCOME TAXES

 

For purposes of our Combined Financial Statements, income taxes have been calculated as if we file income tax returns for the Business on a standalone basis for all periods presented. Historically, our U.S. operations and certain of our non-U.S. operations were included in the income tax returns of ExxonMobil and its subsidiaries. We believe the assumptions supporting the allocation and presentation of income taxes on a separate return basis are reasonable. However, our tax results, as presented in the Combined Financial Statements, may not be reflective of the results that the Business expects to generate in the future.

 

The components of income before income taxes are as follows:

 

		December 31, 2022				December 31, 2021
			(In thousands)
Domestic		$	151,671			$	121,394
Foreign			(17,943	)			12,645
Income from operations before income taxes			133,728				134,039

 

The expense from income taxes consists of the following components:

 

		December 31, 2022				December 31, 2021
			(In thousands)
Current:
Federal		$	28,002			$	22,026
State			8,662				6,413
Foreign			-				1,218
Total current expense from income taxes		$	36,664			$	29,657
Deferred:
Federal			1,187				912
State			1,294				(785	)
Foreign			(5,024	)			2,323
Total deferred expense from income taxes		$	(2,543	)		$	2,450
Total expense from income taxes		$	34,121			$	32,107

 

 

BILLINGS REFINERY & ASSOCIATED LOGISTICS BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS

 

A reconciliation of the statutory federal income tax rate to the effective income tax rate is as follows:

 

		December 31, 2022				December 31, 2021
			(In thousands)
Federal statutory income tax rate			21.0	%			21.0	%
State income tax expense			5.9				3.3
Foreign rate differential			(0.9	)			0.7
Non-deductible expenses			(0.4	)			(0.9	)
Return to provision adjustments			-				(0.1	)
Effective tax rate, operations			25.6	%			24.0	%

 

The Business determined that all of its federal, state and foreign deferred tax assets were more likely than not to be realized. In making such a determination, the Business evaluates a variety of factors including the projected future taxable income, scheduled reversals of deferred tax liabilities, prudent tax planning strategies, and recent financial operations. The evaluation of this evidence requires significant judgement about the forecasts of future taxable income, based on the plans and estimates we are using to manage the underlying Business.

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Business’s net deferred income taxes are as follows:

 

		December 31, 2022				December 31, 2022
Deferred tax assets:			(In thousands)
Net operating losses		$	2,091			$	-
Accruals and reserves			925				1,574
Gross deferred tax assets		$	3,016			$	1,574
Deferred tax liabilities:
Inventory adjustments			(4,133	)			(7,066	)
Outside basis difference for unconsolidated subsidiary			(10,486	)			(9,845	)
Depreciation and amortization			(54,980	)			(53,789	)
Gross deferred tax liabilities		$	(69,599	)		$	(70,700	)
Deferred income tax liabilities, net		$	(66,583	)		$	(69,126	)

 

At December 31, 2022 and 2021, the Business had no U. S. federal and state NOL carryforwards. At December 31, 2022 and 2021, the Business also had no federal or state tax credit carryforwards. At December 31, 2022, the Business has approximately $2.1 M of foreign NOL carryforwards. The Business had no foreign NOL carryforwards, at December 31, 2021.

 

The Business’s operations are subject to U.S. federal, state and local and foreign income taxes. In preparing these Combined Financial Statements and to the extent the Business has historically been included in the Parent income tax returns, the Business has prepared its taxprovision for operations following a separate return method. The separate return method applies ASC 740 to the Combined Financial Statements on the basis the Business was a separate taxpayer. As a result, the tax treatment of certain items reflected in the Combined Financial Statements may not be reflected in the consolidated tax returns of Parent. Therefore, such items as net operating losses, credit and other similar loss carryforwards, and other deferred taxes may exist in the Combined Financial Statements that may not exist or will differ from the amounts reported in Parent’s consolidated tax return.

 

The Business recognizes the benefit of tax positions taken or expected to be taken in its tax returns in the financial statements when it is more likely than not that the position will be sustained upon examination by authorities. Recognized tax positions are measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement. As of December 31, 2022, the Business had no unrecognized tax benefits.

 

 

BILLINGS REFINERY & ASSOCIATED LOGISTICS BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS

 

As of December 31, 2022 and 2021, the Business has no unrecognized tax benefits which would affect the Business’s effective tax rate if recognized. The Business does not expect any significant changes in its tax positions that would warrant recognition of a liability for unrecognized income tax benefits during the next 12 months. The Business recognizes interest and penalties related to uncertain tax positions in income tax expense.

 

On August 16, 2022, the Inflation Reduction Act (the IRA) was signed into law in the U.S. Among other changes, the IRA introduced a corporate minimum tax on certain corporations with average adjusted financial statement income over a three-tax year period in excess of $1.0 billion and an excise tax on certain stock repurchases by certain covered corporations for taxable years beginning after December 31, 2022 and several tax incentives to promote clean energy. Based on our current analysis and pending future guidance to be issued by Treasury, we do not believe these provisions will have a material impact on our Combined Financial Statements.

 

10.	SUBSEQUENT EVENTS

 

The Business has evaluated subsequent events through the date that this report was available to be issued, May 25, 2023 and determined that there were no subsequent events requiring recognition or disclosure in the Business’ accompanying Combined Financial Statements and notes to the Combined Financial Statements.

 

 

Exhibit 99.3

 

Billings Refinery & Associated Logistics Business

 

Condensed Combined Financial Statements

 

For the quarterly period ended March 31, 2023

 

 

TABLE OF CONTENTS

 

	Page
Condensed Combined Balance Sheets as of March 31, 2023 and December 31, 2022	3
Condensed Combined Statements of Income for the three months ended March 31, 2023 and 2022	4
Condensed Combined Statements of Net Parent Company Investment for the three months ended March 31, 2023 a nd 2022	5
Condensed Combined Statements of Cash Flows for the three months ended March 31, 2023 and 2022	6
Notes to Condensed Combined Financial Statements	7

 

 

BILLINGS REFINERY & ASSOCIATED LOGISTICS BUSINESS

 

CONDENSED COMBINED BALANCE SHEETS (Unaudited)

(in thousands)

 

		March 31, 2023				December 31, 2022
Assets
Current assets:
Accounts receivable, net		$	48,363			$	50,489
Inventories			282,105				248,386
Prepaid expenses and other current assets			1,587				1,775
Total current assets			332,055				300,650
Investments			64,928				61,643
Property, plant, & equipment, net			298,797				303,688
Other assets, net			9,182				10,128
Total assets		$	704,962			$	676,109
Liabilities
Current liabilities:
Accounts payable			33,347				47,317
Accrued liabilities			110,039				129,307
Due to related parties			132,106				143,273
Total current liabilities			275,492				319,897
Deferred income tax liabilities			70,864				66,583
Total liabilities		$	346,356			$	386,480
Net parent company investment
Net parent company investment			358,606				289,629
Total liabilities and net parent company investment		$	704,962			$	676,109

 

The accompanying notes are an integral part of these Condensed Combined Financial Statements.

 

 

BILLINGS REFINERY & ASSOCIATED LOGISTICS BUSINESS

 

CONDENSED COMBINED STATEMENTS OF INCOME (Unaudited)

(in thousands)

 

Revenues and other income		Three Months Ended March 31, 2023				Three Months Ended March 31, 2022
Sales and other operating revenue		$	531,218			$	581,683
Income from equity affiliates			7,967				6,232
Total revenues and other income			539,185				587,915
Costs and other deductions
Crude oil and product purchases - related party			(357,317	)			(449,193	)
Production and manufacturing expenses			(85,581	)			(68,133	)
Selling, general and administrative expenses			(10,209	)			(9,486	)
Depreciation expense			(5,570	)			(5,579	)
Other taxes and duties			(757	)			(930	)
Total costs and other deductions			(459,434	)			(533,321	)
Income before income taxes			79,751				54,594
Income taxes			(20,413	)			(14,177	)
Net income		$	59,338			$	40,417

 

The accompanying notes are an integral part of these Condensed Combined Financial Statements.

 

 

BILLINGS REFINERY & ASSOCIATED LOGISTICS BUSINESS

 

CONDENSED COMBINED STATEMENTS OF NET PARENT COMPANY INVESTMENT (Unaudited)

(in thousands)

 

		Net Parent Company Investment
Balance at December 31, 2021		$	380,352
Net income			40,417
Net transfers from (to) Parent			(53,640	)
Balance at March 31, 2022		$	367,129
Balance at December 31, 2022			289,629
Net income			59,338
Net transfers from (to) Parent			9,639
Balance at March 31, 2023		$	358,606

 

The accompanying notes are an integral part of these Condensed Combined Financial Statements.

 

 

BILLINGS REFINERY & ASSOCIATED LOGISTICS BUSINESS

 

CONDENSED COMBINED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands)

 

		Three Months Ended				Three Months Ended
		March 31, 2023				March 31, 2022
Operating activities:
Net Income		$	59,338			$	40,417
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			5,570				5,579
Deferred income taxes			4,281				371
Other non-cash items, net			-				96
Dividends received less than equity in current earnings of equity companies			(3,285	)			(2,089	)
Change in assets and liabilities:
Accounts receivable			2,126				(21,960	)
Inventory			(33,720	)			(45,404	)
Prepaid expenses and other current assets			188				733
Other assets			946				298
Accounts payable			(13,969	)			(9,943	)
Accrued liabilities			(19,268	)			15,135
Due to related parties			(11,167	)			72,119
Net cash (used by) provided from operating activities			(8,960	)			55,352
Investing activities:
Purchases of property and equipment			(671	)			(1,635	)
Other investing activities, net			(8	)			(77	)
Net cash used in investing activities			(679	)			(1,712	)
Financing activities:
Net transfers from (to) Parent			9,639				(53,640	)
Net cash (used by) provided from financing activities			9,639				(53,640	)
Net increase (decrease) in cash and cash equivalents			-				-
Cash and cash equivalents at beginning of period			-				-
Cash and cash equivalents at end of period			-				-

 

The accompanying notes are an integral part of these Condensed Combined Financial Statements.

 

 

BILLINGS REFINERY & ASSOCIATED LOGISTICS BUSINESS

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (Unaudited)

 

1.	DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Description of Business

 

On October 20, 2022, ExxonMobil Corporation (referred to as “ExxonMobil” or “Parent”) entered into a definitive agreement to sell its Billings Refinery & Associated Logistics Business (collectively the “Business”) to Par Pacific Holdings. The Business is a fully integrated fuels value chain, deriving value along the entire chain from the sourcing of crude oil to refining, distributing, and marketing of fuels to its customers, which includes operations in the states of Montana, Wyoming, Idaho, Utah, eastern Washington, and the Dakotas. The Business operates a high-conversion, complex 63,000 barrels per day (“bpd”) refinery in Billings, Montana, which processes low-cost Western Canadian and regional Rocky Mountain crude oil grades. In addition to the refinery, the Business owns a 65% interest in an adjacent cogeneration facility and an expansive Petroleum Administration for Defense Districts (“PADD”) IV & V marketing and logistics network. The logistics assets include the wholly-owned 70-mile, 55,000 bpd Silvertip Pipeline, a 40% interest in the 750-mile, 65,000 bpd Yellowstone refined products pipeline, and seven refined product terminals. Total storage capacity across the refinery and logistics locations totals 4.1 million barrels (“MMbbls”).

 

Basis of Presentation

 

These Condensed Combined Financial Statements were prepared on a stand-alone basis and have been derived from the Consolidated Financial Statements and accounting records of ExxonMobil. These unaudited Condensed Combined Financial Statements were prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements, which are required to be filed with the Securities and Exchange Commission. Accordingly, the accompanying Condensed Combined Financial Statements do not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for full financial statements and should be read in conjunction with the audited annual Combined Financial Statements and notes to the audited annual Combined Financial Statements. In the opinion of management, the accompanying Condensed Combined Financial Statements contain all adjustments, which include only normal recurring adjustments, necessary to fairly state the condensed combined results for the interim periods presented.

 

The Business has not operated as a separate stand-alone legal entity and is comprised of certain wholly-owned subsidiaries and other component operations of ExxonMobil. These Condensed Combined Financial Statements are presented as carve-out financial statements and reflect the combined historical results of operations, financial position, and cash flows of the Business for the periods presented as historically managed within ExxonMobil. The Condensed Combined Financial Statements may not be indicative of the Business’s future performance and do not necessarily reflect what the financial position, results of operations, and cash flows would have been had it operated as a stand-alone company during the periods presented.

 

All intracompany transactions have been eliminated. All intercompany transactions between the Business and ExxonMobil have been included in these Condensed Combined Financial Statements. For those transactions between the Business and ExxonMobil that are historically settled in cash, the Business has reflected such balances in the Condensed Combined Balance Sheet as “Due to related parties”. The aggregate net effect of such transactions that are not historically settled in cash has been reflected in the Condensed Combined Balance Sheet as “Net parent company investment” and in the Condensed Combined Statements of Cash Flows as a financing activity.

 

ExxonMobil utilizes a centralized treasury management function for financing its operations. The Business did not maintain separate bank accounts. The cash generated and used by our operations is deposited to ExxonMobil’s centralized accounts, which are commingled with the cash of other entities controlled by the ExxonMobil. The cash and cash equivalents held by ExxonMobil have not been assigned to the Business for any of the periods presented, as the balances are not directly attributable to the Business. The Business reflects transfers of cash to and from ExxonMobil’s cash management system as a component of “Net parent company investment” in the Condensed Combined Balance Sheet. ExxonMobil’s third-party long- term debt and the related interest expense have not been allocated to the Business for any of the periods presented as the Business was not the legal obligor of such debt.

 

 

BILLINGS REFINERY & ASSOCIATED LOGISTICS BUSINESS

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (Unaudited)

 

Historically, ExxonMobil and its affiliates provide a variety of services to the Business. The Condensed Combined Statements of Income includes expense allocations for services and certain support functions that are provided on a centralized basis within Parent such as treasury, accounting, human resources, and legal services. These allocations were based on direct usage when identifiable, with the remainder allocated on a basis of the percentage of operating expenses, the percentage of production capacity or headcount. The Business believes the basis from which the expenses have been allocated are a reasonable reflection of the utilization of services provided to, or the benefit received by, the Business during the periods presented. These allocated amounts, however, are not necessarily indicative of the actual amounts that might have been incurred or realized had the Business operated as a separate stand-alone entity during the periods presented. Consequently, these Condensed Combined Financial Statements do not necessarily represent the results the Business would have achieved if we had operated as a separate stand-alone entity from ExxonMobil during the periods presented. Refer to Note 3, “Related Party Transactions and Net Parent Company Investment” for additional information.

 

The accompanying Condensed Combined Financial Statements have been prepared assuming the Business will continue as a going concern which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.

 

2.	INVENTORIES

 

Inventories at March 31, 2023 and December 31, 2022 consist of the following:

 

		March 31, 2023			December 31, 2022
		(In thousands)
Crude oil		$	61,468			$	55,420
Petroleum products			193,641				167,805
Material and Supplies			26,996				25,161
Total		$	282,105			$	248,386

 

3.	RELATED PARTY TRANSACTIONS AND NET PARENT COMPANY INVESTMENT

 

The Condensed Combined Financial Statements have been prepared on a standalone basis and are derived from the Consolidated Financial Statements and accounting records of ExxonMobil. The following discussion summarizes activity between the Business and ExxonMobil.

 

Related Party Purchases

 

The Business purchases all of crude oil and products from other ExxonMobil affiliates. Therefore, all “Crude oil and product purchases” in the Condensed Combined Statements of Income are related party transactions, and included in the Condensed Combined Balance Sheet, as “Due to related parties”. Additionally, the Business historically purchases all of its Renewable Identification Numbers (“RINs”) from other ExxonMobil affiliates at the settlement date. These RINs are necessary to meet the

U.S. Environmental Protection Agency (“EPA”) renewable volume obligations under the Renewable Fuel Standard program, pursuant to the Energy Policy Act of 2005 and the EISA. During the three months ended March 31, 2023, the Business purchased $55.1 million of RINs from other ExxonMobil affiliates. There were no RINs purchases in the three months ended March 31, 2022. The Business had no sales to related parties during the periods presented.

 

 

BILLINGS REFINERY & ASSOCIATED LOGISTICS BUSINESS

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (Unaudited)

 

Allocation of Corporate Expenses

 

The Condensed Combined Statements of Income include expenses for certain centralized functions and other programs provided and administered by ExxonMobil, as described in Note 1, “Description of Business and Basis of Presentation.” The costs of these services have been allocated to the Business and are included in the Condensed Combined Statements of Income, as follows:

 

		Three Months Ended March 31, 2023				Three Months Ended March 31, 2022
		(In thousands)
Production and manufacturing expenses		$	9,478			$	8,625
Selling, general and administrative expenses			3,340				2,787
Total corporate allocations		$	12,818			$	11,412

 

Defined Benefit Pension Plans and Other Employee Benefits

 

Certain Business employees participate in the defined benefit pension, and defined contribution benefit plans sponsored by the Parent, which include employees from other ExxonMobil subsidiaries. The Business’s share of defined pension and postretirement health and life insurance costs were $1.5 million and $2.0 million for the three months ended March 31, 2023 and 2022, respectively. The Business’s share of defined contribution plan costs were $0.7 million and $0.6 million for the three months ended March 31, 2023 and 2022, respectively.

 

Net Parent Company Investment

 

The net transfers to the Parent are included within “Net parent company investment” on the Condensed Combined Statements of Net Parent Company Investment. The components of the transfers to Parent were as follows:

 

		Three Months Ended March 31, 2023				Three Months Ended March 31, 2022
Cash pooling and general financing activities, net of purchases from related parties		$	(19,311	)		$	(78,858	)
Corporate allocations			12,818				11,412
Income taxes			16,132				13,806
Total net transfers from (to) Parent		$	9,639			$	(53,640	)

 

4.	ACCRUED LIABILITIES

 

Accrued liabilities consist of the following:        

 

		March 31, 2023				December 31, 2022
			(In thousands)
Federal RINs liabilities		$	91,030			$	110,989
Accrued taxes other than income			16,183				15,865
Contract liabilities			696				804
Accrued compensation			2,130				1,649
Accrued liabilities		$	110,039			$	129,307

 

5.	COMMITMENTS AND CONTINGENCIES Litigation

 

The Business can be subject to claims and complaints that may arise in the ordinary course of business. Management has regular litigation reviews, including updates from ExxonMobil, to assess the need for accounting recognition or disclosure of these contingencies. The Business would accrue an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated. If a range of amounts can be reasonably estimated and no amount within range is a better estimate than any other amount, then the minimum of the range is accrued. The Business wouldn’t record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated or when the liability is believed to be only reasonably possible or remote. For contingencies where an unfavorable outcome is reasonably possible and which are significant, the Business would disclose the nature of the contingency and, where feasible, an estimate of the reasonably possible loss. For purposes of the contingency disclosures, “significant” includes material matters as well as other matters which management believes should be disclosed. Based on a consideration of the process described, the Business does not have any material loss contingencies.

 

 

BILLINGS REFINERY & ASSOCIATED LOGISTICS BUSINESS

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (Unaudited)

 

6.	INCOME TAXES

 

In accordance with ASC 740 Income Taxes, each interim reporting period is considered integral to the annual period, and tax expense is measured using an estimated annual effective tax rate. An entity is required to record income tax expense each quarter based on its annual effective tax rate estimated for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis, adjusted for discrete taxable events that occur during the interim period.

 

Our estimated annual effective rate for 2023 and 2022 includes the impact of permanent tax differences, state income tax, Foreign Rate Differential and valuation allowances.

 

The tax provision for the three months ended March 31, 2023 and March 31, 2022 was $20.4 million (25.6% provision on pre- tax income) and $14.2 million (26.0% provision on pre-tax income), respectively. The effective tax rate is higher than the statutory tax rate primarily due to the impact of state income tax.

 

We will continue to evaluate both the positive and negative evidence on a quarterly basis in determining the need for a valuation allowance with respect to our deferred tax assets. Changes in positive and negative evidence, including differences between estimated and actual results, could result in changes in the valuation of our deferred tax assets that could have a material impact on our combined financial statements. Changes in existing tax laws could also affect actual tax results and the realization of deferred tax assets over time.

 

7.	SUBSEQUENT EVENTS

 

The Business has evaluated subsequent events through the date the unaudited Condensed Combined Financial Statements were available to be issued, July 28, 2023. On June 1, 2023, Par Pacific Holdings completed its acquisition of the Business from ExxonMobil.

 

Exhibit 99.4

 

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

On June 1, 2023 (the “Closing Date”), Par Montana, LLC, Par Montana Holdings, LLC, and Par Rocky Mountain Midstream, LLC, each subsidiaries of Par Pacific Holdings, Inc. (“Par” or the “Company”), completed the acquisition from ExxonMobil Corporation, ExxonMobil Oil Corporation, and ExxonMobil Pipeline Company (collectively, the “Sellers”) of (i) the high-conversion, complex refinery located in Billings, Montana and certain associated distribution and logistics assets (the “Billings Assets”), (ii) the Sellers’ 65% limited partnership equity interest in Yellowstone Energy Limited Partnership ("YELP"), (iii) and the Sellers’ 40% equity interest in Yellowstone Pipeline Company ("YPLC") (and collectively with YELP and the Billings Assets, the “Billings Acquisition”) pursuant to and subject to the terms and conditions of the Equity and Asset Purchase Agreement dated as of October 20, 2022 (and as amended on the Closing Date). Par completed the Billings Acquisition, including the purchase of hydrocarbon inventory and other working capital items for $315.5 million, for a total purchase price of approximately $625.5 million.

 

Par financed the Billings Acquisition, including the associated hydrocarbon inventory, with cash on hand and approximately $215.0 million borrowed pursuant to the "Billings Incremental Facility" under the Company's Asset-Based Revolving Credit Agreement dated as of April 26, 2023 (the "ABL Credit Agreement"), with the borrowers party thereto, the lenders party thereto, as lenders, the issuing banks party thereto, and Wells Fargo Bank, National Association, as administrative agent and collateral agent for each member of the lender group. To facilitate the funding for the Billings Acquisition, the ABL Credit Agreement was amended on May 30, 2023 to effect the Billings Incremental Facility, adjust the borrowing base to account for the Billings Acquisition assets, and fund an escrow account to purchase a portion of the hydrocarbon inventory associated with the Billings Acquisition on the Closing Date.

 

The Billings Acquisition and impact of the Billings Incremental Facility were included in Par’s unaudited historical condensed consolidated balance sheet as of June 30, 2023; therefore, a pro forma balance sheet is not included herein. Par’s unaudited historical condensed consolidated statement of operations for the six months ended June 30, 2023 includes the effects of the Billings Acquisition and the Billings Incremental Facility from June 1, 2023 through June 30, 2023. The unaudited pro forma condensed combined statements of operations and accompanying notes (the "Pro Forma Financial Information") for the six months ended June 30, 2023 and for the year ended December 31, 2022 were prepared as if the Billings Acquisition and the Billings Incremental Facility had occurred on January 1, 2022. The unaudited pro forma condensed combined statements of operations have been derived from and should be read in conjunction with the following:

.

•

Par’s audited historical consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2023;

•

Par’s unaudited historical condensed consolidated financial statements and related notes included in its Quarterly Report on Form 10-Q for the six months ended June 30, 2023 filed with the SEC on August 9, 2023;

•

The Billings Acquisition's audited historical combined financial statements as of and for the years ended December 31, 2022 and 2021 attached as Exhibit 99.2; and

•

The Billings Acquisition's unaudited historical condensed combined financial statements for the three months ended March 31, 2023 and 2022 attached as Exhibit 99.3.

 

The Pro Forma Financial Information has been prepared using currently available information and estimates and assumptions made by the Company’s management. Accordingly, actual results could differ materially from the Pro Forma Financial Information. Significant estimates and assumptions include the preliminary purchase price allocation. Management believes the underlying estimates and assumptions provide a reasonable and supportable basis for presenting the significant estimated effects of the Billings Acquisition and the Billings Incremental Facility. The Pro Forma Financial Information does not purport to represent what Par's actual consolidated results of operations or financial position would have been had the Billings Acquisition and the Billings Incremental Facility occurred on the date assumed, nor are they necessarily indicative of our future financial condition or consolidated results of operations.

 

 

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (Unaudited)

Six Months Ended June 30, 2023

(in thousands, except per share amounts)

 

		Par				Billings Acquisition As Adjusted (Note 3)				Transaction Accounting Adjustments (Note 4)					Pro Forma Combined
Revenues		$	3,469,136			$	974,868			$	(34,002	)	(a)		$	4,410,002
Operating expense
Cost of revenues (excluding depreciation)			2,863,826				749,293				(34,002	)	(a)			3,579,117
Operating expense (excluding depreciation)			184,963				124,154				(4,408	)	(b)			304,709
Depreciation and amortization			52,576				9,266				7,599		(b),(c)			69,441
General and administrative expense (excluding depreciation)			42,454				8,772				—					51,226
Equity (earnings) from refining and logistics investments			(425	)			(14,156	)			515		(d)			(14,066	)
Acquisition and integration costs			12,544				—				—					12,544
Par West redevelopment and other costs			5,363				—				—					5,363
Total operating expenses			3,161,301				877,329				(30,296	)				4,008,334
Operating income			307,835				97,539				(3,706	)				401,668
Other income (expense)
Interest expense and financing costs, net			(31,159	)			—				(6,197	)	(e)			(37,356	)
Debt extinguishment and commitment costs			(17,682	)			—				—					(17,682	)
Other income, net			344				—				—					344
Equity earnings from Laramie Energy, LLC			10,706				—				—					10,706
Total other expense, net			(37,791	)			—				(6,197	)				(43,988	)
Income (loss) before income taxes			270,044				97,539				(9,903	)				357,680
Income tax expense			(2,141	)			(23,907	)			22,400		(f)			(3,648	)
Net income		$	267,903			$	73,632			$	12,497				$	354,032
Income per share
Basic		$	4.45												$	5.88
Diluted		$	4.39												$	5.80
Weighted-average number of shares outstanding
Basic			60,255													60,255
Diluted			61,020													61,020

 

The accompanying notes are an integral part of the unaudited pro forma condensed combined financial information. Refer to Note 4 for Transaction Accounting Adjustments.

 

 

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

(Unaudited)

Year Ended December 31, 2022

(in thousands, except per share amounts)

 

		Par				Billings Acquisition As Adjusted (Note 3)				Transaction Accounting Adjustments (Note 4)					Pro Forma Combined
Revenues		$	7,321,785			$	2,798,249			$	(86,512	)	(a)			10,033,522
Operating expense
Cost of revenues (excluding depreciation)			6,376,014				2,351,743				(86,512	)	(a)			8,641,245
Operating expense (excluding depreciation)			342,209				285,071				(22,548	)	(b)			604,732
Depreciation and amortization			99,769				22,491				20,481		(b),(c)			142,741
(Gain)/loss on sale of assets, net			(169	)			142				—					(27	)
General and administrative expense (excluding depreciation)			62,396				23,278				—					85,674
Equity (earnings) from refining and logistics investments			—				(18,204	)			1,236		(d)			(16,968	)
Acquisition and integration costs			3,663				—				—					3,663
Total operating expenses			6,883,882				2,664,521				(87,343	)				9,461,060
Operating income (loss)			437,903				133,728				831					572,462
Other income (expense)
Interest expense and financing costs, net			(68,288	)			—				(14,872	)	(e)			(83,160	)
Debt extinguishment and commitment costs			(5,329	)			—				—					(5,329	)
Other income, net			613				—				—					613
Total other expense, net			(73,004	)			—				(14,872	)				(87,876	)
Income (loss) before income taxes			364,899				133,728				(14,041	)				484,586
Income tax expense			(710	)			(34,121	)			29,888		(f)			(4,943	)
Net income		$	364,189			$	99,607			$	15,847				$	479,643
Income per share
Basic		$	6.12												$	8.06
Diluted		$	6.08												$	8.01
Weighted-average number of shares outstanding
Basic			59,544													59,544
Diluted			59,883													59,883

 

The accompanying notes are an integral part of the unaudited pro forma condensed combined financial information. Refer to Note 4 for Transaction Accounting Adjustments.

 

 

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Pro Forma Condensed Combined Financial Information

 

1.	Basis of Presentation

 

The following Pro Forma Financial Information reflects the pro forma effects of the Billings Acquisition as well as the Billings Incremental Facility.

 

The Pro Forma Financial Information has been prepared in accordance with Article 11 of Regulation S-X ("Article 11") as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” The pro forma adjustments include transaction accounting adjustments, which reflect the application of required accounting for the Billings Acquisition. Article 11 permits presentation of reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur, otherwise known as Management’s adjustments. Par has elected to present Management's adjustments in Note 5.

 

The Billings Acquisition was accounted for by Par using the acquisition method of accounting in accordance with the accounting guidance in Financial Accounting Standards Board Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”). The acquisition method of accounting is dependent upon certain valuations and other studies that have yet to progress to a stage where there is sufficient information for a definitive measure. Accordingly, the pro forma adjustments presented are preliminary and are subject to revision based on a final determination of fair value, policy alignment, and other purchase accounting adjustments. Differences between these preliminary estimates and the final amounts may have a material impact on the accompanying Pro Forma Financial Information.

 

2.	Preliminary Purchase Price Allocation

 

The preliminary purchase price for the Billings Acquisition has been allocated to the assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition. The Company expects to finalize the purchase price allocation as soon as reasonably practicable, which will not extend beyond the one-year measurement period provided under ASC 805. Accordingly, the final purchase accounting adjustments could differ materially from the accounting adjustments included in the Pro Forma Financial Information presented herein. An increase or decrease in the preliminary fair value of the assets acquired and liabilities assumed could impact the Company's results of operations following the Billings Acquisition due to differences in the purchase price allocation and depreciation for some of the assets.

 

The Billings Acquisition was accounted for as a business combination under ASC 805. A summary of the estimated purchase price and its preliminary allocation to the net assets acquired at the Closing Date is as follows (in thousands):

 

 

Base purchase price (including a $30 million deposit funded at signing)		$	310,000
Plus: estimated value of hydrocarbon inventory			272,333
Plus: working capital and other purchase price adjustments			43,147
Estimated purchase price		$	625,480
Trade accounts receivable		$	2,395
Inventories¹			299,228
Property, plant, and equipment			259,088
Operating lease right-of-use assets			3,562
Investment in refining and logistics subsidiaries			86,600
Other long-term assets			4,094
Total assets			654,967
Short-term operating lease liabilities			2,081
Other current liabilities			7,056
Environmental liabilities²			18,869
Long-term operating lease liabilities			1,481
Total liabilities			29,487
Total		$	625,480
(1) Inventories includes estimated hydrocarbon inventory in addition to materials and supplies which were included as working capital adjustments.
(2) Par assumed certain environmental liabilities associated with the Billings Acquisition, including costs related to hazardous waste corrective measures, ground and surface water sampling and monitoring. Par expects to incur these costs over a 20 to 30 year period. The valuation is based on management’s best estimates of probable future costs using currently available information.

 

 

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Pro Forma Condensed Combined Financial Information

 

3.	Billings Acquisition Reclassification Adjustments

 

Certain reclassifications have been made to the historical presentation of the Billings Acquisition’s financial statements to conform to Par’s historical presentation.

 

Reclassifications included in the Pro Forma Condensed Combined Statement of Operations for the six months ended June 30, 2023 (in thousands).

 

Billings Acquisition Presentation		Billings Acquisition Historical January 1, 2023 through March 31, 2023				Billings Acquisition Historical April 1, 2023 through May 31, 2023				Presentation Reclassifications					Billings Acquisition As Adjusted			Par Presentation
Revenues and other income
Sales and other operating revenue		$	531,218			$	443,650			$	—				$	974,868		Revenues
Income from equity affiliates			7,967				6,189				(14,156	)	(a)			—
Total Revenues and other income			539,185				449,839				(14,156	)				974,868
Costs and other deductions																		Operating expenses
Crude oil and product purchases - related party			357,317				364,589				27,387		(b),(c),(e)			749,293		Cost of revenues (excluding depreciation)
Production and manufacturing expenses			85,581				58,050				(19,477	)	(b), (d)			124,154		Operating expense (excluding depreciation)
Selling, general and administrative expenses			10,209				5,363				(6,800	)	(c), (d)			8,772		General and administrative expense (excluding depreciation)
Depreciation expense			5,570				3,696				—					9,266		Depreciation and amortization
Other taxes and duties			757				353				(1,110	)	(e)			—
			—				—				(14,156	)	(a)			(14,156	)	Equity (earnings) from refining and logistics investments
Total costs and other deductions			459,434				432,051				(14,156	)				877,329		Total operating expenses
Income before income taxes			79,751				17,788				—					97,539		Operating income
Income taxes			(20,413	)			(3,494	)			—					(23,907	)	Income tax expense
Net Income		$	59,338			$	14,294			$	—				$	73,632		Net income

 

(a)

To reclassify "Income from equity affiliates" to "Equity (earnings)/loss from refining and logistics investments" to conform to Par's presentation.

(b)

To reclassify certain "Production and manufacturing expenses" related to demurrage, shipping, rail logistics and feedstock fuel consumed to "Cost of revenues (excluding depreciation)" to conform to Par's presentation.

(c)

To reclassify "Selling, general and administrative expenses" related to rail transportation costs for asphalt and various taxes to "Cost of revenues (excluding depreciation)" to conform to Par's presentation.

(d)

To reclassify "Selling, general and administrative expenses" related to property taxes to "Operating expense (excluding depreciation)" to conform to Par's presentation.

(e)

To reclassify "Other taxes and duties" to "Cost of revenues (excluding depreciation)" to conform to Par's presentation.

 

 

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Pro Forma Condensed Combined Financial Information

 

Reclassifications included in the Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2022 (in thousands).

 

Billings Acquisition Presentation		Billings Acquisition Historical				Presentation Reclassifications					Billings Acquisition As Adjusted			Par Presentation
Revenues and other income
Sales and other operating revenue		$	2,798,249			$	—				$	2,798,249		Revenues
Income from equity affiliates			18,204				(18,204	)	(a)			—
Total revenues and other income			2,816,453				(18,204	)				2,798,249
Costs and other deductions														Operating expenses
Crude oil and product purchases - related party			2,292,634				59,109		(b),(c), (f)			2,351,743		Cost of revenues (excluding depreciation)
Production and manufacturing expenses			324,686				(39,615	)	(b), (d)			285,071		Operating expense (excluding depreciation)
Selling, general and administrative expenses			40,878				(17,600	)	(c), (d)			23,278		General and administrative expense (excluding depreciation)
Depreciation expense			22,633				(142	)	(e)			22,491		Depreciation and amortization
Other taxes and duties			1,894				(1,894	)	(f)			—
			—				(18,204	)	(a)			(18,204	)	Equity (earnings) from refining and logistics investments
			—				142		(e)			142		(Gain)/loss on sale of assets, net
Total costs and other deductions			2,682,725				(18,204	)				2,664,521		Total operating expenses
Income before income taxes			133,728				—					133,728		Operating income
Income taxes			(34,121	)			—					(34,121	)	Income tax expense
Net Income		$	99,607			$	—				$	99,607		Net Income

 

(a)

To reclassify "Income from equity affiliates" to "Equity (earnings)/loss from refining and logistics investments" to conform to Par's presentation.

(b)

To reclassify certain "Production and manufacturing expenses" related to demurrage, shipping, rail logistics and feedstock fuel consumed to "Cost of revenues (excluding depreciation)" to conform to Par's presentation.

(c)

To reclassify "Selling, general and administrative expenses" related to rail transportation costs for asphalt and various taxes assessed on a seller to "Cost of revenues (excluding depreciation)" to conform to Par's presentation.

(d)

To reclassify "Selling, general and administrative expenses" related to property taxes to "Operating expense (excluding depreciation)" to conform to Par's presentation.

(e)

To reclassify a portion of "Depreciation expense" to "(Gain)/loss on sale of assets, net" to conform to Par's presentation.

(f)

To reclassify "Other taxes and duties" to "Cost of revenues (excluding depreciation)" to conform to Par's presentation.

 

 

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Pro Forma Condensed Combined Financial Information

 

4.	Billings Acquisition Pro Forma Adjustments

 

Statements of Operations for the six months ended June 30, 2023 and for the year ended December 31, 2022

 

The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2023 and for the year ended December 31, 2022, respectively, reflect the following adjustments.

 

(a)	Reflects the elimination of the historical transactions between Par and the Billings Acquisition relating to the sale of finished product.

 

(in thousands)		Six Months Ended June 30, 2023				Year Ended December 31, 2022
Revenues		$	(34,002	)		$	(86,512	)
Cost of revenues (excluding depreciation)			(34,002	)			(86,512	)
Net impact to eliminate historical transactions		$	—			$	—

 

(b)

Represents the reversal of refinery turnaround costs expensed by the Billings Acquisition in accordance with its historical accounting policy to conform to Par’s accounting policy which is to capitalize costs incurred in connection with planned major maintenance refinery activities and subsequently amortize such costs on a straight-line basis until the next planned turnaround which is expected to occur in six years. In addition, the adjustment includes costs related to a major repair on a crude unit which was expensed by the Billings Acquisition and which would have been capitalized under Par's policy over 15 years.

 

(in thousands)		Six Months Ended June 30, 2023¹				Year Ended December 31, 2022
Operating expense (excluding depreciation)		$	(4,408	)		$	(22,548	)
Depreciation and Amortization			825				1,623
Net impact for accounting policy alignment		$	(3,583	)		$	(20,925	)

(1)

Information associated with June 30, 2023 historical financial information for the Billings Acquisition is presented as of or for the period ending May 31, 2023.

 

(c)

Represents the elimination of historical depreciation expense and recognition of new depreciation expense based on the preliminary fair value estimates of acquired property, plant and equipment The depreciation of property, plant and equipment is based on the preliminary estimated remaining useful lives of the acquired assets and is calculated on a straight-line basis.

 

(in thousands)		Six Months Ended June 30, 2023¹				Year Ended December 31, 2022
Elimination of historical depreciation expense		$	(9,266	)		$	(22,491	)
Depreciation of acquired property, plant, and equipment			16,040				41,349
Net adjustment to depreciation and amortization expense		$	6,774			$	18,858

(1)

Information associated with June 30, 2023 historical financial information for the Billings Acquisition is presented as of or for the period ending May 31, 2023.

 

A 10% change in the valuation of property, plant and equipment would result in a corresponding increase or decrease in depreciation expense for the six months ended June 30, 2023 and for the year ended December 31, 2022, of approximately $1.6 million and $4.1 million, respectively, assuming an overall weighted average remaining useful life of 16.3 years.

 

(d)

Represents the adjustment to Equity (earnings) from refining and logistics investments for the amortization, of basis differences arising between the relative fair value of the underlying assets compared to their carryover basis, assuming a weighted average useful life of 19.8 years and 42.9 years for YELP and YPLC, respectively.

 

(e)

Represents the additional interest expense of $6.2 million and $14.9 million for the six months ended June 30, 2023 and for the year ended December 31, 2022, respectively, recorded for the Billings Incremental Facility. The interest rate used for the Billings Incremental Facility is 6.9% as of July 31, 2023, based on the adjusted Secured Overnight Financing Rate of 5.4% plus the applicable margin of 1.5%. A 0.125% change in the variable interest rate of the Billings Incremental Facility would increase or decrease interest expense presented in the unaudited pro forma condensed combined statements of operations by $0.1 million and $0.3 million, for the six months ended June 30, 2023 and for the year ended December 31, 2022, respectively.

 

(f)

Represents the removal of the Billings Acquisition’s federal historical income tax expense due to Par’s existing net operating loss tax carryforwards that would be released through a deferred tax valuation allowance to offset future tax from the Billings Acquisition. Therefore, no federal income tax expense will be recognized from the Billings Acquisition. In addition, as a result of the Billings Acquisition, the estimated blended state tax rates of 1.0% were modified driven by the apportionment factors applicable to each state.

 

 

5.	Management’s Adjustments

 

Management expects the post-acquisition business to realize certain cost savings as compared to the historical combined costs of Par and the Billings Acquisition operating independently. Management’s adjustments, which are based on estimated costs savings related to overhead and refinery operating expenses, are not reflected in the unaudited pro forma condensed combined statements of operations. Management estimates that, had the transaction been completed as of January 1, 2022, expenses of approximately $17.5 million and $43.6 million for the six months ended June 30, 2023 and for the year ended December 31, 2022 would not have been incurred. These expenses primarily related to certain centralized information technology, procurement, management and other corporate services.

 

The adjustments shown below include those deemed necessary by management to fairly state the Pro Forma Financial Information. Management’s adjustments include forward-looking information subject to the safe harbor protections of the Securities Exchange Act of 1934, and actual results may differ materially from what is presented below as efforts progress to integrate the Billings Acquisition’s operations.

 

Six Months Ended June 30, 2023
(in thousands, except per share amounts)		Pro Forma Combined				Management Adjustments				As Adjusted
Operating expense (excluding depreciation)		$	304,709			$	(10,847	)		$	293,862
General and administrative expense (excluding depreciation)			51,226				(6,804	)			44,422
Income before income taxes			357,680				17,651				375,331
Income tax expense			(3,648	)			(180	)			(3,828	)
Net income		$	354,032			$	17,471			$	371,503
Income per share
Basic		$	5.88			$	0.29			$	6.17
Diluted		$	5.80			$	0.29			$	6.09

 

Year Ended December 31, 2022
(in thousands, except per share amounts)		Pro Forma Combined				Management Adjustments				As Adjusted
Operating expense (excluding depreciation)		$	604,732			$	(25,304	)		$	579,428
General and administrative expense (excluding depreciation)			85,674				(18,792	)			66,882
Income before income taxes			484,586				44,096				528,682
Income tax expense			(4,943	)			(450	)			(5,393	)
Net income		$	479,643			$	43,646			$	523,289
Income per share
Basic		$	8.06			$	0.73			$	8.79
Diluted		$	8.01			$	0.73			$	8.74

 

v3.23.2

Document And Entity Information	May 30, 2023
Document Information [Line Items]
Entity, Registrant Name	Par Pacific Holdings, Inc.
Document, Type	8-K/A
Document, Period End Date	May 30, 2023
Entity, Incorporation, State or Country Code	DE
Entity, File Number	1-36550
Entity, Tax Identification Number	84-1060803
Entity, Address, Address Line One	825 Town & Country Lane, Suite 1500
Entity, Address, City or Town	Houston
Entity, Address, State or Province	TX
Entity, Address, Postal Zip Code	77024
City Area Code	281
Local Phone Number	899-4800
Title of 12(b) Security	Common Stock, $0.01 par value
Trading Symbol	PARR
Security Exchange Name	NYSE
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity, Emerging Growth Company	false
Amendment Description	Form 8-K/A date of report 5-30-23
Amendment Flag	true
Entity, Central Index Key	0000821483

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