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Christine Thorp - Director, IR and Public Affairs William Pate - President and CEO Joseph Israel - President and CEO of Par Petroleum, LLC Chris Micklas - CFO Will Monteleone - SVP, Mergers and Acquisitions.

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Jeff Dietert - Simmons Doug Leggate - Bank of America/Merrill Lynch Chi Chow - Tudor, Pickering, Holt Andrew Shapiro - Lawndale Capital Thomas Mitchell - Miller Tabak.

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Presentation:.

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Greetings and welcome to the Par Pacific Holdings Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Ms.

Christine Thorp, Director of Investor Relations. Thank you. You may begin..

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Thank you. Welcome everyone to Par Pacific Holdings’ third quarter 2015 earnings conference call. With me today is William Pate, President and Chief Executive Officer of Par Pacific Holdings, Chris Micklas, Chief Financial Officer and Joseph Israel, President and Chief Executive Officer of Par Petroleum, LLC.

Before we begin this discussion of Par Pacific Holdings’ financial results for its third quarter ended September 30, 2015, please note that remarks made by management today may contain forward-looking statements.

These forward-looking statements may discuss plans, expectations, estimates and projections that involve significant risks and uncertainties, which could cause actual results to differ materially from the results discussed in these forward-looking statements.

Information about the risks we face and the uncertainties associated with Par Pacific Holdings’ forward-looking statements can be found in the Company’s periodic reports filed with the SEC. Because of these risks and uncertainties, investors should not place undue reliance on forward-looking statements.

We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances. Today’s call is being recorded and will be available on the Investor Relations section of our Web site. Now let me turn the call over to Bill..

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Thank you, Christine. Thank you for joining us this morning. We have now reported four consecutive quarters of strong financial performance.

It is important to note that this quarter’s adjusted EBITDA of $34 million reflects mid-cycle crack spreads although we did have a few events that broke our way and boosted results, notably the continued decline in crude oil prices.

Joseph and Chris will go into these items and our overall operating and financial performance in a minute, but first I wanted to make a few comments about my recent appointment to the organization and the creation of Par Pacific Holdings.

The Board of Directors and management decided to change the name of our organization to Par Pacific Holdings to more properly reflect our ambitious and diversified growth objective. We have a couple of great businesses in our Hawaiian franchise and Laramie Energy. As you may know, Par came into existence in 2012 and started with one employee.

Since that time, this management team has built a large corporate entity from scratch, and we believe we can accomplish much more.

With our equity sponsorship from Sam Zell, our $1.4 billion net operating loss carry forward, and the already proven ability of our management to acquire and integrate businesses, we feel that we are perfectly positioned to execute an acquisition-oriented growth strategy.

This strategy is timely, given the need for a number of energy and infrastructure companies to address balance sheet and other capital requirements in this challenging environment.

Our tax attributes gives us a unique advantage, allowing us to generate higher returns on our capital invested and therefore greater shareholder value creation from accretive acquisitions. Personally I am delighted to be leading this effort.

I spent 21 years in the Zell organization pursuing opportunistic acquisitions and serving as an advisor and board member to companies that were situated similarly to Par Pacific. My sole focus will be to build on what already is a very successful company.

And I am fortunate to be a part of a great team that has created and implemented the necessary controls and processes to ensure crisp business execution and swift acquisition integration. To be clear, we intend to buy and build energy and infrastructure businesses.

Our main focus will be on growing our existing refining, marketing and logistics business to leverage our commercial operations and our fixed asset base. We will also prioritize similar businesses in Hawaii that, like our current operation, serve as a critical provider of the Islands’ energy and infrastructure requirements.

Our Laramie Energy business unit is completing some great wells and we will consider various ways to expand their operation as well. Finally, we will look at other energy and infrastructure opportunities in the United States that leverage our tax attributes.

Before turning the call over to Joseph to review our refining, marketing and logistics operations, I’d like to provide an update on the progress of Laramie Energy, our natural gas development company that operates in the Piceance basin of western Colorado.

First, Par and the other investors have agreed to change the name from Piceance Energy to Laramie Energy, which was the name used by Bob Boswell in his first foray into the Piceance basin.

Laramie continues to make great progress on their development program, including reducing drilling and completion costs over the past three years by 33% to less than $1.2 million per well.

They already have a 99% success rate, with EURs of 1.8 Bcfe, and they are able to generate single-well economic returns in the 15% to 25% range based on the current NYMEX strip. The team recently announced a wellbore drilling program with Wexpro, which is the upstream subsidiary of the Utah based utility Questar.

This arrangement further enhances these well economics because Wexpro has agreed to fund approximately two-thirds of the drilling cost, yet Laramie will receive more than its pro rata share of the economics in the partnership. We understand that this is an extremely challenging environment for natural gas development companies.

Nonetheless, unlike many of Laramie’s upstream peers, we have significant flexibility in the operations almost all of our acreage is held by production and we have no midstream or interstate pipeline minimum volume commitments.

The Laramie team has a proven track record of creating value through commodity price cycles and we believe they will continue to create shareholder value with the progress they have demonstrated in their development program.

In summary, the new Par Pacific reflects our desire to continue to grow our business opportunistically and build on the strong organizational momentum. I thank you for your support. Joseph will now comment on the progress of our Hawaiian operations..

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Thanks Bill and good morning everyone. Yesterday we reported Par Pacific’s third quarter adjusted EBITDA of $34 million. Results were driven by the following three key dynamics.

One, Mid Pacific refining margin environment at mid cycle in the third quarter, two, approximately $11 million positive impact attributed to falling oil price environment, and three, successful execution of planned maintenance in the refinery with approximately $2 million cost.

Overall, strong results, reflecting our improved capture rate and profitability profile, across the board.

In other words, by improving and maintaining a high level of safety and reliability performance, yields optimization, feedstock selection and flexible sale profile, we were able to improve our financial performance beyond just what market conditions gave us. Here are some numbers to put into perspective our improvements.

Year-to-date, when comparing with last year, our on-island sales are up 13%, throughput is up 11%, production cost is down 19% on a per barrel basis. On the production side, we have improved our yield value by increasing distillate yield from 39% to 44%, gasoline and others from 28% to 30% yields, and reducing fuel oil yield from 30% to 22%.

Bottom-line, year-over-year, while market has given us additional $2.93 per barrel to work with, on combined product and feedstock index basis, our realized net operating margin improved by $7.56 per barrel. In the third quarter, our refinery system operated under a mid-cycle environment.

Combined $8.49 per barrel, 4-1-2-1 crack spread and mid pacific crude differential index in the third quarter was $0.07 per barrel under the three year average. The weak index in the third quarter was mainly driven by seasonally low availability of ANS and global negative distillate pricing trends.

Also, the Singapore fuel oil crack was a back down to mid cycle, following the strong first half 2015 environment. The October combined mid pacific index for products and crude differential was $7.50 per barrel. $14 a barrel falling Brent price in the third quarter has supported our refining and retail EBITDA by approximately $11 million.

As communicated in the past, the sensitivity of the oil price trend to our business is reflected in the following two ways. First, the contractual pricing lag on our jet fuel and utility related fuel sales, and second, the natural retail street pricing lag to changes in commodity prices.

In the third quarter, we successfully executed our planned reformer catalyst regeneration and other planned maintenance in our Visbreaker and Cogeneration units at a cost of approximately $2 million, or $0.30 per barrel. No major turnarounds are planned until the third quarter of 2016.

Third quarter On-island sales at 57,000 barrel per day were 8% lower than our second On-island sales, mainly due to timing and demand for jet fuel and fuel oil. 17,000 barrels per day were exported including gasoline to the West coast.

We are expecting fourth quarter on-island sales to get back on track, and based on new supply contracts, including the recent award from the Defense Logistics Agency, we are well positioned for 2016 on-island demand with over 65,000 barrels per day, 8% more than our 2015 forecast.

Our refinery throughput in the third quarter was 74,000 barrels per day, consistent with guidance, and our planned throughput for the fourth quarter is close to 80,000 barrels per day. Our retail segment contributed $10 million of adjusted EBITDA in the third quarter.

Year-over-year, gasoline volume and merchandise sales are up 3% and 11%, respectively, on a same store basis. Mid Pac, on a standalone basis, has contributed approximately $11 million of adjusted EBITDA to our retail and refining results since we acquired it on April 1st.

Integration efforts continue with the objective of realizing annual $5 million of synergies and cost savings by the end of the year. In summary, we have now generated $133 million of adjusted EBITDA in the past 12 months.

We have benefitted from favorable market conditions but most importantly, we have improved our profitability profile to better capture future opportunities. In addition, we are well positioned to grow and duplicate our business model in different places. And now, I’ll turn the call over to Chris, to review our third quarter numbers in more detail..

Thank you, Joseph. During the third quarter, Par Pacific reported net income of $15 million, or $0.39 per share, compared with a net loss of $39 million, or a loss of $1.19 per share in the third quarter of 2014. Adjusted net income for the third quarter was $24 million, or $0.64 per share.

Adjusted EBITDA was $34 million, a $62 million improvement compared to a loss of $28 million in the third quarter of 2014. This quarter we have two additional adjustments for arriving at our Adjusted EBITDA.

The first is a $13 million reduction in net income to adjust for changes in the valuation of our refinery inventory and changes in the valuation of the liability related to our supply and off take agreement with J Aron.

We use the FIFO method of accounting for valuing inventory and we value our liability to Our Aron at the estimated termination value at the quarter end. This results in a timing difference.

The inventory valuation adjustment used to calculate adjusted EBITDA removes the impact of the timing difference to more closely reflect the cash impact of our cost of sales. The second adjustment removes a non-cash charge of $10 million related to our commodity marketing and logistics business.

We have continued to see market softness in the spreads between heavy crudes sourced in Canada and the price sold to refineries on the Gulf Coast. As a result, we decided to terminate our barge leases. The change in the market condition resulted in an impairment of our goodwill and our intangible asset related to the barge leases.

Consistent with previous quarters, our third quarter included the following items that are excluded from adjusted EBITDA. An increase of $4 million in the estimated amount owed to Tesoro under the earn-out provision of our agreement.

As our earnings profile has improved, the probability of future payouts has increased which is reflected in this adjustment. Due to falling crude prices, we had $7 million in un-realized losses on future commodity contracts and a lower of cost or market inventory adjustment.

We had a $1 million loss due to an increase in the value of our common stock warrants. However, during the quarter, approximately half of our outstanding warrants were exercised. Therefore, going forward, we expect the magnitude of this adjustment to decrease relative to prior periods.

We reported approximately $1 million in losses from our equity investment in Laramie Energy. And finally, we incurred $200,000 of acquisition and integration expenses related to our acquisition of Mid Pac. At quarter-end, our cash balance totaled $102 million, total debt was $170 million and total liquidity was $153 million.

Year-to-date, we have generated $144 million of cash from operations which has enabled us to repay net debt of $29 million, complete the Mid Pac acquisition, and make an additional $28 million investment in Laramie. Now, I will turn the call back to Bill for his closing comments..

Thank you, Chris. That concludes our prepared remarks.

Operator, would you see if we have any questions?.

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Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question today is coming from Jeff Dietert of Simmons. Please proceed with your questions..

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Thank you our next question is coming from Doug Leggate of Bank of America/Merrill Lynch. Please proceed with your question..

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Thank you. Our next question is coming from Chi Chow of Tudor, Pickering, Holt. Please proceed with your question. .

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Thank you. Our next question is coming from Andrew Shapiro of Lawndale Capital. Please proceed with your questions. .

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Thank you. [Operator Instructions] Our next question is coming from Thomas Mitchell of Miller Tabak. Please proceed with your question. .

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Thank you. At this time I’d like to turn the floor back over to management for any additional or closing comment. .

Thank you. Listen, I want to thank everybody for joining us. I’ve been here now for three weeks and a day, so it's been a learning experience for me. We have a great team around here, we are very proud of what we’ve created. And we look forward to creating even more and I look forward to speaking with you in the near future. Thank you. .

Ladies and gentlemen, thank you for your participation in today’s teleconference. You may disconnect your lines at this time. And have a wonderful day..