I'd now like to turn the conference over to Richard Roberts, Vice President of FP&A and Investor Relations. Please go ahead.
Good afternoon, everyone. We very much appreciate you joining us this afternoon for our CVR Energy first quarter 2026 earnings call. With me today are Mark Pytosh, our Chief Executive Officer, Dane Neumann, our Chief Financial Officer, Mike Wright, our Chief Operating Officer, Travis Capps, our Chief Commercial Officer, and other members of management. Prior to discussing our 2026 first quarter results, let me remind you that this conference call may contain forward-looking statements as that term is defined under federal securities laws. For this purpose, any statements made during this call that are not statements of historical facts may be deemed to be forward-looking statements. You are cautioned that these statements may be affected by important factors set forth in our filings with the Securities and Exchange Commission and in our latest earnings release.
As a result, actual operations or results may differ materially from the results discussed in the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, except to the extent required by law. This call also includes various non-GAAP financial measures. The disclosures relating to such non-GAAP measures, including reconciliation to the most directly comparable GAAP financial measures, are included in our 2026 first quarter earnings release that we filed with the SEC in Form 10-Q for the period and will be discussed during the call. With that said, I'll turn the call over to Mark.
Thank you, Richard. Good afternoon, everyone, thank you for joining our earnings call. In the first quarter, our operations performed well with crude utilization of 97% and ammonia plant utilization of 103%. Major geopolitical events drove volatility in energy and fertilizer markets, which have set up attractive market opportunities for the balance of 2026. Given the disruptions in global supply chains with loss of production and lack of product movement for refined products and fertilizer, CVR Energy is well positioned to improve our margin capture for the balance of the year. We are pleased to announce the first quarter of 2026 dividend of $0.10 per share, we believe our prospects should allow for balanced debt reduction and capital returns to shareholder as we move forward. Now, let me turn the call over to Dane to discuss our financial highlights.
Thank you, Mark. Good afternoon, everyone. For the first quarter of 2026, our consolidated net loss was $160 million. Losses per share were $1.91, and EBITDA was a loss of $52 million. Our first quarter results include unrealized derivative losses of $158 million, which primarily relate to NYMEX gasoline and diesel crack spread swaps entered into during the quarter against expected future production at a crack spread value of $447 million through 2027, which I will discuss further in our petroleum segment results. In addition, our results also include an unfavorable change in our RFS liability of $51 million and favorable inventory valuation impacts of $120 million. Excluding the above-mentioned items, Adjusted EBITDA for the quarter was $37 million, and adjusted losses per share were $1.24.
Adjusted EBITDA in the petroleum segment was a loss of $50 million for the first quarter, compared to a loss of $30 million for the first quarter of 2025. Increased RIN expenses, higher operating costs, and realized derivative losses drove the majority of the decrease from the prior year period. Combined total throughput for the first quarter of 2026 was approximately 214,000 barrels per day. Crude utilization for the quarter was approximately 97% of nameplate capacity, and light product yield was 93% on total throughput volumes. Benchmark cracks for the first quarter of 2026 increased from the prior year period, with the Group 3-2-1 averaging $21.58 per barrel, compared to $17.65 per barrel in the first quarter of 2025.
Our first quarter realized margin, adjusted for unrealized derivative losses, the change in RFS liability, and inventory valuation, was $4.72 per barrel, representing a 22% capture rate on the Group 3-2-1 benchmark. RIN prices increased significantly from the first quarter 2025 levels, more than doubling to almost $9.50 per barrel for the first quarter of 2026. Net RINs expense for the quarter, excluding the change in RFS liability, was $143 million, or $7.37 per barrel, which negatively impacted our capture rate for the quarter by approximately 34%. EPA has repeatedly stated that the cost of RINs is ultimately passed through to consumers at the pump.
The decision to establish the highest RVO in history through the recent Set Rule has driven RIN prices significantly higher, which has in turn raised the price of gasoline. This is in direct conflict with the administration's stated goal of lowering fuel costs for American consumers. RIN prices have increased more than 75% since the beginning of the year, in addition to the 18% increase in the RVO, currently adding $0.25-$0.30 to every gallon of fuel purchased in America. If the administration is serious about lowering fuel prices, it should start with the RFS. The estimated accrued RFS obligation on the balance sheet was $204 million at March 31st, representing 113 million RINs marked to market at an average price of $1.80.
As EPA has not yet ruled on our pending 2025 petition, we will continue to recognize 100% of Wynnewood Refining Company's RIN obligation in our financials, which for the first quarter of 2026 was approximately $52 million. Had Wynnewood Refining Company received the 100% SRE we believe it is entitled to, our consolidated capture rate for the quarter would have improved by approximately 12%. Once again, EPA has missed a deadline on ruling on Wynnewood Refining Company's 2025 SRE petition. Will the EPA ever meet a deadline? Our first quarter 2026 results included derivative losses totaling $182 million.
As previously discussed, $158 million of this loss was the unrealized mark-to-market change in all of our open crack spread swap positions as of March 31st, and our physical positions intended to offset are expected to be sold as the swap contracts expire through 2027. Given this disconnect, we do not view the impact of the unrealized loss as a detriment to the current period, and as we have done in the past, adjust the amount out for our Adjusted EBITDA figures. As we progress through the year, if these positions remain negative, we would anticipate these derivative losses to be more than offset by any gains on physical production as we realize increased crack spreads on the remainder of our unhedged production.
As of March 31st, our total open crack swap positions included 9.9 million barrels of diesel and 2.4 million barrels of gasoline. Of this total, approximately 2.9 million barrels of diesel swaps are in 2027, with the remainder in 2026. This represents roughly 15% of our expected gasoline and diesel production volumes for 2026 and 4% for 2027. Since the end of the quarter, prompt NYMEX crack spreads have declined, and we have seen Group 3 strengthen relative to the onset of the war. We will continue to actively monitor these positions and plan to be opportunistic in managing our exposure going forward, which could include closing out these positions or adding other positions depending on market conditions.
Direct operating expenses in the petroleum segment were $6.10 per barrel for the first quarter, compared to $8.58 per barrel in the first quarter of 2025. The decrease in direct operating expenses per barrel was primarily due to increased throughput volumes as the Coffeyville refinery was undergoing a turnaround in the first quarter of 2025. Adjusted EBITDA on the fertilizer segment was $78 million for the first quarter, compared to $53 million for the prior year period. Ammonia utilization rate was 103%, with both plants running well and experiencing minimal downtime during the quarter. The board of directors of CVR Partners general partner declared a distribution of $4 per common unit for the first quarter of 2026.
As CVR Energy owns approximately 37% of CVR Partners common units, we will receive a proportionate cash distribution of approximately $16 million. Cash flow from operations for the first quarter of 2026 was $64 million, and free cash flow was $21 million, of which approximately $63 million was generated by the fertilizer segment. Significant uses of cash in the quarter included $47 million of capital spending, $40 million of cash interest, $15 million for the costs associated with the debt refinancing, and $3 million paid for the non-controlling interest portion of the CVR Partners' fourth quarter of 2025 distribution. Total consolidated capital spending on an accrual basis was $44 million, which included $29 million in the petroleum segment and $14 million in the fertilizer segment.
For the full year of 2026, we estimate total consolidated capital spending to be approximately $200 million-$240 million. Turning to the balance sheet, we ended the quarter with a consolidated cash balance of $512 million, which includes $128 million of cash in the fertilizer segment. Total liquidity as of March 31st, excluding CVR Partners, was approximately $923 million, which was comprised primarily of $384 million of cash and availability under the ABL facility of $539 million. We remain committed to our deleveraging goal and plan to continue working towards a gross leverage target of $1 billion, excluding debt at CVR Partners.
Looking ahead to the second quarter of 2026 for our petroleum segment, we estimate total throughputs to be approximately 200,000-215,000 barrels per day, direct operating expenses to range between $110 million and $120 million, and total capital spending to be between $35 million and $40 million. For the fertilizer segment, we estimate our ammonia utilization rate to be between 95% and 100%, direct operating expenses excluding inventory and turnaround impacts to be between $57 million and $62 million, and total capital spending to be between $28 million and $32 million. With that, Mark, I will turn it back over to you.
Thank you, Dane. In summary, despite a slow start to the year in the refining segment, market fundamentals have changed quickly over the past few months. We believe the outlook is constructive for both of our businesses. Two areas of the economy that are among the most impacted by the ongoing conflicts in the Middle East are energy and fertilizers. Starting with the refining segment, global inventories of crude oil and refined products have tightened considerably over the past few months with the effective closure of the Strait of Hormuz. While the extent of the damage to refining capacity is still unclear at this point, the larger impact to global refined product markets has been availability of crude oil supplies and the need to curtail refinery runs as a result.
Fortunately, the U.S. refining fleet has largely been unimpacted so far, although refined product inventories in the U.S. have also been declining, partly due to increased product exports. Gasoline and diesel inventories in the Mid-Continent were elevated at the beginning of the year, driven by higher than average refinery utilization levels that weighed on crack spreads, particularly gasoline cracks. This has changed significantly over the past month, with gasoline inventories declining by 17% and diesel inventories declining 20% compared to the beginning of the year. Demand trends have improved as well for both gasoline and distillate in the Mid Con. On a days of supply basis, gasoline supply is sitting at the low end of the five-year range, while distillate supply is below the five-year average.
This improvement in Mid Con supply and demand fundamentals over the first quarter has tightened refined product basis in the Mid Con relative to other regions of the country. Accessing higher demand regions outside the Mid Con, it also remains one of our key strategic initiatives as we work to improve margin capture in the refining segment. We have stepped up these efforts and recently began utilizing the rail loading facility at Wynnewood that was repurposed after the reversion of the renewable diesel unit. We remain optimistic that basis has room to improve further over the intermediate term with the new product pipeline from Kansas to Denver scheduled to come online later this year.
Other pipelines under development over the next few years, including the Western Gateway Pipeline, should offer additional outlets from the Mid Con and the Gulf Coast as well. In the fertilizer segment, the spring planting season is underway and it's going well so far this year. The USDA is currently estimating approximately 95 million acres of corn will be planted in 2026. While this is a decline from the record levels of 2025, 95 million acres is well above the average level of corn plantings over the last 5 years. Nitrogen fertilizer inventory levels at the beginning of the year were tight across the industry after the large planting seasons in the U.S. and Brazil in 2025 and the ongoing conflicts in Russia and Ukraine. The recent events in the Middle East have caused fertilizer markets to tighten even further.
Roughly 30% of nitrogen fertilizer production typically transits through the Strait of Hormuz, and multiple nitrogen fertilizer production facilities across the Middle East have been damaged or curtailed production over the past few months due to limited natural gas supplies. While it remains unclear how long these issues in the Middle East will persist, we will continue to focus on safely and reliably running our plants at high utilization levels to meet the needs of our customers during the challenging time in our industry. Looking at quarter-to-date pricing metrics for the 2Q 2026, Group 3-2-1 cracks have averaged $38.36 per barrel, with the Brent WTI spread at $3.81 per barrel and the WCS differential at $15.46 per barrel under WTI.
Prompt fertilizer prices are $950 per ton for ammonia and $525 per ton for UAN. In closing, I would like to thank our employees for their excellent execution, safely achieving 97% crude utilization and 103% ammonia utilization for the first quarter. Strong operating performance, along with the improvements in crack spreads and the progress we have made so far in reducing debt, have enabled us to announce a dividend of $0.10 per share for the first quarter of 2026. We intend to continue our deleveraging strategy as we look to return to $1 billion of gross debt on the balance sheet. In addition, we will continue to work to improve margin capture in our base business while we seek opportunities to add scale and geographic diversity to our portfolio.
With that, operator, we are ready to take questions.
We will now begin the question- and- answer session. To ask a question, press star, then the number one on your telephone keypad. We ask that you please limit your questions to one and one follow-up, and then reenter the queue for any additional questions you may have. Our first question will come from the line of Matthew Blair with TPH. Please go ahead.
Great. Thank you, good afternoon. If you could talk a little bit about your increase in exposure to WCS at Hardisty. I think your disclosures show roughly an 8%, yield or sorry, crude slate exposure to WCS in Q1 versus, you know, basically zero in Q4. You know, why are you making that change, and what advantages does that offer to CVI here?
Matthew, it's Mark. Good afternoon. When, you know, when the actions were taken in Venezuela, in early January, we saw almost an immediate change in the values for Western Canadian and that the differential backed up by about $3 a barrel. You know, when we looked at it, ran our models, we saw that had more value than our other alternatives. We've been running a lot more Western Canadian, around 18,000 barrels a day. We'll continue to do that if the differentials hold in there. They've been good so far and, you know, we're almost four months into it, so good value in that crude.
Sounds good. Could I just confirm a few things on your derivative exposure? For the first quarter, was the realized impact that rolled through your numbers approximately a headwind of about $37 million or about $2 a barrel? You know, I'm getting that based on your total impact of $195 million less the $158 million of unrealized. Secondly, for the second quarter, if there was a mark to market today, do you have an approximate impact that these derivatives would have in Q2? Thank you.
Matthew, this is Dane Neumann. Good afternoon. Just to summarize on the first quarter. We did, as you saw in our 10-K, we did have some crack spread positions on. The realized loss on those was about $25 million, really due to positions that were put on, lower losses Jan Feb, and then with March, they got exacerbated. The remainder of that's the loss is associated with really inventory hedging as the prices ran up on crude, and particularly in the month of March.
As it relates to the second quarter, we won't give any specifics, but we did give out kind of the notional amounts of our hedges and also the effectively the 447 representing the amount of volume and at a strike price. You can kind of calculate an average from that. I'll remind you that we did put on those positions early on, early at the outset of the conflict. The market was pretty heavily backwardated at that time, so I wouldn't assume that average applies over the entire strip.
Great. Thank you.
You got it.
Our next question comes from the line of Manav Gupta with UBS. Please go ahead.
Hi. Hey, good morning. I just want to understand if you could talk a little bit about the macro as in Mid Con as to what you're seeing out there in terms of supply, demand, cracks, and how long do you expect some of these cracks to remain elevated even after Strait of Hormuz opens? There are a few out there that could take like two months for flows to normalize, but on top of that, you know, there are many people who don't have crude globally, so cracks could remain well elevated. From your perspective, where are you sitting, can you talk a little bit about the refining macro?
Sure. Thank you, Manav. You know, what we experienced is, and typical for the Mid Con, there was a lag. When the conflict broke out, the coastal markets adjusted faster than our market did. Over the course of March, we, you know, we started to close the gap between the Mid Con and the Gulf Coast in particular, which is, you know, our closest market, but also the other western markets. Cracks have, you know, our differentials or our basis has really, I'd say, gotten closer to normal there between where we are. Our cracks have elevated faster than the others. We have been able to move product into other markets, and it's drawing, the other markets are drawing out of the Mid Con.
We've had a big drop in inventory for the last three weeks. Our market is, I'd say, adjusted now to the conflict. We agree with you. We tend to think this is gonna go longer than, you know, maybe people expect a snap back. Our market's already set up with the other markets, and I think we will benefit without the spread and basis which we, it took us three or four weeks for that to fall into place. We're enjoying a lot better cracks in April, and the markets have settled in and are drawing out of the Mid Con at this point. We expect that as long as this conflict is in place, it will continue.
Perfect. My quick follow-up here is, I think I know the answer, but I just want to make sure the dividend that has been reinstated, that's not a variable dividend, right? That's your path to a normal dividend, which will be there and maybe grow from here. Is that the right way to think about it?
That's correct.
Okay. Yeah.
Our fertilizer business is a variable. This is not meant to be a variable dividend, Manav.
Thank you so much.
As a reminder, to ask a question, press star one on your telephone keypad. Our next question comes from the line of Alexa Petrick with Goldman Sachs. Please go ahead.
Hey, good morning, team, and thank you for taking our question. We just wanted to ask a follow-up on the hedges announced during the quarter. Can you talk a little bit about what drove the decision to add those hedges? Is there any strategy there that we should expect to continue or any color on that would be helpful?
Yeah. Thanks, Alexa. You know, historically, we've put hedges on when we've seen market levels above mid-cycle. You know, we've done that over the past couple of years as some downside protection. As the war broke out and we saw things elevate quickly, Not knowing if the market was gonna correct itself quickly or not, we wanted to get in the market and capture some of those higher values. As we see, this is dragging on longer and, you know, a little slower might have been better, but we are where we are. As we said in the prepared remarks, you know, look, I think we're gonna continue to monitor.
You know, we don't like to hedge over roughly 30% of our production, just to make sure that we're covered between our two refineries. That's on gas or diesel independently. We've got a pretty healthy book on right now that we'll continue to monitor. If anything, look to, you know, try to lock in any basis positions as we see improvement from there.
Okay, that's helpful. Our follow-up is just on capital allocation priorities. You've outlined that $1 billion gross leverage target. We've now got the dividend. Can you talk about how you're balancing the two? You've also previously discussed potentially having interest for M&A. Any color on those different pieces would be helpful.
Sure. I will separate the two. On capital allocation, I think with the change in the market dynamics and opportunities there, we feel like we can continue on the path we've been on from a deleveraging, but also paying dividends going forward. With what we see for economics for the rest of the year, we feel like we can do both. That's why we're comfortable bringing the dividend back this quarter is that we just feel like we can achieve what we wanted to achieve and also return some capital to our shareholders. On M&A, we continue to be, that continues to be a priority for us.
I would say the last couple of months have been one where maybe everybody's focused on all the volatility. Not, you know, that hasn't been our highest priority the last two months. You know, as things settle down, we will be back and looking for opportunities and in discussions with folks. The volatility is certainly that's our number one priority right now is managing the base business and positioning the company to do well in a very volatile market, but with much more attractive economics than we had two months ago.
Okay. That's helpful. I'll turn it over. Thank you.
Sure. Thank you.
This concludes our question and answer session. I'll hand the call back over to Mark for closing comments.
Okay. Well, thanks, everybody. We, we appreciate you joining our call today, and we look forward to discussing our second quarter results in late July. Thank you very much, and have a good day.
That concludes our call today. Thank you all for joining. You may now disconnect.