Par Pacific Holdings Inc (NYSE:PARR) Q3 2019 Earnings Conference Call - Final Transcript

Nov 05, 2019 • 10:00 am ET

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Par Pacific Holdings Inc (NYSE:PARR) Q3 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

Thank you. [Operator Instructions] Our first question comes from the line of Neil Mehta with Goldman Sachs. Please proceed with your question.

Analyst
Neil Singhvi Mehta

Good morning, Thanks and congrats for the continued strong share performance. The first question I have is a little more near term. California crack spreads have been -- or West Coast crack spreads I should say -- have been very robust. Back half of third quarter here to start off the fourth quarter and just any comments you can provide about how Washington has been running and whether you've been able to kind of capture the strength of the market.

Executive
Joseph Israel

Yes Neil. This is Joseph. We definitely see the impact of maintenance issues in PADD V since really October. Supply issues drive low inventories and the high pricing. Our refinery in Tacoma is well-positioned to benefit from it this quarter so looking good there.

Executive
William C. Pate

Yes and this is Bill. Just to add to that in Joseph's prepared comments I'd note that we averaged 38000 barrels a quarter in Q3 and the refinery is running really well and Joseph's signaled that we expect to take that up a couple thousand barrels a day in Q4 in the context of a stronger market.

Analyst
Neil Singhvi Mehta

I appreciate that. That's great to hear. The follow-up question I guess the biggest risk in the near term as we think about the Par story is just the waterborne crude market. And I just wanted to get your perspective on a couple of dynamics around that. One is how you think about higher freight cost and shipping cost and what that could mean for the imported barrel; two with the amount of mediums and heavy crudes off the market as a result of OPEC cuts and disruptions what does that mean? And it seems like ANS is well bid as well. So there's a lot of pieces to that question but wanted to give you guys an opportunity to respond to that as that's probably the primary near-term headwind for the business.

Executive
Joseph Israel

Okay. Global oil anchor rates are really higher in the fourth quarter mainly driven by lower visibility of crude tankers and specifically VLCCs. The shortage is mainly driven by sanctions and geopolitical reasons as well as IMO. We have scrubbers installations and LFSO floating storage etc. Our Hawaii refinery has approximately two to three months of crude oil purchase lead time. And as a result we should not expect any freight impact on our crude differential in the fourth quarter. Freight peaked around mid-October for a couple of weeks and has improved since. We just started recently to buy our first quarter crude oil for Hawaii and it is hard to say where is it going from here. At the end of the day crude price will have to align with products otherwise no global refineries run will force pricing adjustments through supply and demand balances.

Again we just turned the IMO corner and we are positioned very well Neil especially in Hawaii and very