3Q 2026 CVR Energy, Inc. Earnings Conference Call - CVR ENERGY INC

Explicit Guidance:

• FY 2026 Capital Spending: Estimated total consolidated capex between $220M and $240M.
• FY 2027 Earnings & FCF: Transaction expected to be >50% accretive to CVR's earnings and free cash flow in the first full year following closing.
• FY 2026 Q4 Petroleum Segment:
  • Throughput: 210,000 to 225,000 barrels per day (excluding acquired assets).
  • Direct Operating Expenses: $115M to $125M.
  • Capital Spending: $45M to $55M.
• FY 2026 Q4 Fertilizer Segment:
  • Milling Utilization: 88% to 93% (impacted by East Dubuque turnaround completion in October).
  • Direct Operating Expenses (excl. inventory/turnaround): $58M to $63M.
  • Turnaround Expenses: $4M to $6M.
  • Capital Spending: $26M to $34M.
• FY 2026 Q4 Hedging:
  • Diesel: ~2.3 million barrels hedged with a notional value of ~$93M.
  • 2027: ~3.2 million barrels hedged fairly ratably across the year.

Business-Segment Outlook:

• Refining Capacity: Post-acquisition crude processing capacity expected to rise from 207,000 to 384,000 barrels per day (nearly doubling).
• Geographic Expansion: Footprint will expand to the Upper Midwest and Northern Great Plains (PAD 2 region), adding St. Paul Park (105k bpd) and Mandan (72k bpd) to existing facilities.
• Marketing & Distribution: Acquisition adds ~590 branded locations in the Upper Midwest/Northern Great Plains, shifting product mix from bulk markets to local rack sales (higher margin placement), with only ~15% of product entering bulk markets versus current higher volumes.
• RIN Exposure: Consolidated RIN obligation expected to decline significantly due to high blending capacity of acquired assets, reducing reliance on third-party RIN purchases; estimated to lower weighted average RIN costs per barrel.
• Synergies: Expected $70M annual run-rate cost and operational synergies.
• Asset Quality: Acquired assets (St. Paul Park, Mandan) reported >99% utilization over the past five years; no immediate "make-up" capital required.
• Strategic Financing: Debt expected to total ~$3.8B at closing (excluding CVR Partners), resulting in leverage of <2x estimated 2026 consolidated pro forma EBITDA.

Market and Competitive Outlook:

• Margin Environment: Anticipated higher-than-mid-cycle margins for 12 to 24 months driven by global supply dislocations, low inventories, and constrained refined product supply from Middle East/Russia.
• Demand Trends: Resilient U.S. demand and ~20% YoY increase in gasoline/diesel exports (averaging 2.9M bpd in Q3 2026) support elevated prices.
• Supply Dynamics: U.S. refinery utilization averaged 96% in Q3 2026 (vs. 92% 5-year avg) as companies defer maintenance; domestic gasoline inventories are 5% below and distillate inventories 9% below 5-year averages.
• Mid-Cycle Assumptions: Management projects "go-forward" mid-cycle earnings on acquired assets to be double the 2024-2025 historical mid-cycle levels (~$5–$6/barrel), citing structural supply-demand changes.
• Crude Slate: Acquired assets to run ~126k bpd Bakken, ~50k bpd Canadian crude (half WCS), and ~50k bpd light sweet; total ~175k bpd throughput.

Macro / Industry Outlook:

• Geopolitics: Ongoing conflicts in Russia/Ukraine and Middle East (Hormuz disruption) expected to sustain elevated refined product prices as damaged refineries repair and inventories rebuild.
• Regulatory (RFS): Management views current RIN costs (approx. 28 cents/gallon at pump) as excessive for small/merchant refiners; urges EPA to exercise waiver authority.
• Regulatory (Merger): Transaction expected to close by year-end 2026, pending Hart-Scott-Rodino expiration and regulatory clearance.

Strategic Initiatives:

• Acquisition: Definitive agreement to acquire Marathon's St. Paul Park (MN) and Mandan (ND) refineries and marketing/logistics assets for ~$4.2B.
• Capital Allocation: Funding mix includes Trafigura (large equity investment), IEP ($500M commitment), $650M from CVR balance sheet, and $2.5B bridge financing (to be refinanced into syndicated secured debt).
• Debt Management: Plan to redeem outstanding 2028 senior notes; equally and ratably secure 2031 and 2034 senior notes upon permanent financing completion.
• Credit Profile: Expectation to substantially improve corporate credit rating profile post-transaction.
• Capital Projects: No immediate coker installation planned for St. Paul Park; current Marathon capital plans integrated into forecasts.

Risks and Headwinds to Outlook:

• Transaction Risks: Dependency on satisfaction of closing conditions, regulatory clearance, financing availability, and successful integration of acquired assets.
• RIN Volatility: Continued high RIN prices remain a significant cost headwind; liability changes are subject to EPA decisions.
• Market Reversion: The current margin environment is viewed as a cycle tailwind; future earnings may normalize to mid-cycle levels, though these are projected higher than historical averages.
• Operational Risks: Integration complexity and potential disruption during the merger process.

Management Tone on the Future:

• Confidence: Describes transaction as "historic," "transformative," and "extremely compelling" with a "compelling forward margin environment."
• Discipline: Emphasizes that the acquisition was underwritten on historical mid-cycle earnings rather than current elevated margins, with valuation at <3.5x 2026 EBITDA.
• Balance Sheet: Committed to reducing leverage post-closing to reach normalized levels, utilizing the current upcycle to deleverage.
• Growth: Views the enlarged platform as critical for "durable free cash flow" and "sustainable capital returns," mitigating volatility inherent in the smaller existing system.

Miscellaneous:

• Dividend: Third quarter 2026 dividend of 10 cents per share announced.
• CVR Partners Distribution: Q3 2026 distribution of $1.79 per common unit (approx. $7M attributable to CVR Energy).
• Operational Metrics: Q3 2026 crude utilization at 105%; Q3 2026 3-2-1 crack spread averaged $68.50/bbl (vs. $25.94/bbl in prior year); RIN prices up >125% to $14/bbl avg.