Exploration & Production | Quarterly / Earnings Reports | Second Quarter (2Q) Update
Par Petroleum Touts Piceance Energy's Cash Flow
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Par Petroleum Corporation reported a second quarter and six months 2014 net loss of $24.7 million and $39.2 million and negative Adjusted EBITDA of $18.8 million and $27.7 million, respectively.
William Monteleone, Chief Executive Officer, commented: "We saw improvements during the early months of the quarter, however, our overall results were negatively impacted by a deterioration in crack spreads, particularly in the distillate portion of the barrel, during June. Our transition and integration of the Hawaii information and accounting systems is progressing and we are turning our focus towards cost reductions to improve overall profitability. We are actively bidding on several contracts to recapture on-island sales. In addition, we are working through the regulatory process to close the Mid Pac acquisition and expect that the transaction will close in late 2014."
In addition, Piceance Energy’s strong operating cash flow will likely defer the previously announced capital contribution by Par of approximately $3.3 million until the first or second quarter of 2015.
Natural Gas and Oil
Par’s investment in Piceance Energy LLC is accounted for using the equity method of accounting. During the second quarter, Piceance generated revenue of $20.7 million vs. $15.5 million for the second quarter 2013, an increase of $5.2 million. During the quarter, Piceance generated operating income of approximately $2.0 million which included $8.6 million of DD&A expense vs. operating income of $1.7 million for the second quarter 2013 which included $4.2 million of DD&A expense.
During the six months, Piceance generated revenue of $41.0 million vs. $29.5 million for the six months 2013, an increase of $11.5 million. During the six months, Piceance generated operating income of approximately $6.0 million which included $15.3 million of DD&A expense vs. operating loss of $1.8 million for the six months 2013 which included $10.7 million of DD&A expense.
The change in operating income was driven by higher natural gas and natural gas liquids pricing. Production for the second quarter 2014 was 4.3 Bcfe compared to 3.6 Bcfe for the second quarter 2013.
2Q 2014 and Six Months 2014
The company reported a consolidated net loss of $24.7 million and negative Adjusted EBITDA of $18.8 million for the second quarter 2014. Significant non-cash items or acquisition and integration costs included in the second quarter results relate to the following:
- $2.4 million of acquisition and integration costs related to the HIE and the Mid Pac acquisitions; and
- $2.3 million in gains related to a change in the value of contingent consideration related to the HIE acquisition.
The company reported a consolidated net loss of $39.2 million and negative Adjusted EBITDA of $27.7 million for six months 2014. Significant non-cash items or acquisition and integration costs included in the six months results relate to the following:
- $5.3 million of acquisition and integration costs related to the HIE and Mid Pac acquisitions;
- $1.7 million in gains related to a change in the fair value of our common stock warrants; and
- $4.8 million in gains related to a change in the value of contingent consideration related to the HIE acquisition.
See the reconciliation of GAAP and non-GAAP financial measures included in Attachment 2.
Refining, Distribution & Marketing
During the second quarter, the refining, distribution and marketing segment had revenue of $771.1 million, gross margin of $18.4 million, and an operating loss of $19.9 million, which includes operating expenses of $34.0 million and depreciation, depletion and amortization (DD&A) expense of $2.5 million.
During the six months, the refining, distribution and marketing segment had revenue of $1,493.0 million, gross margin of $45.4 million, and an operating loss of $31.8 million, which includes operating expenses of $67.2 million and depreciation, depletion and amortization (DD&A) expense of $4.7 million.
The refinery operated at an average throughput of 71,000 barrels per day, or 75% utilization, for the second quarter 2014. Production costs before DD&A expense (see table below) for the second quarter averaged $4.35/bbl of throughput. Gross refining margin per barrel totaled $1.63/bbl during the same period.
Commodity Marketing and Logistics
During the second quarter, Texadian generated gross margin of $2.6 million vs. $3.3 million for the second quarter 2013, a decrease of approximately $0.7 million. During the second quarter 2014, segment operating income was $1.3 million which included approximately $0.5 million of DD&A expense vs. $2.2 million of operating income for the second quarter 2013 which included $0.5 million of DD&A expense.
During the six months, Texadian generated gross margin of $4.2 million vs. $13.2 million for the six months 2013, a decrease of approximately $9.0 million. During the six months, segment operating income was $1.5 million which included approximately $1.0 million of DD&A expense vs. $8.3 million of operating income for the six months 2013 which included $1.0 million of DD&A expense. Texadian profitability was lower because during early 2013 operating conditions on the Mississippi River provided the company a unique position to capture arbitrage opportunities; the conditions have since abated.