Hello, everyone. Thank you for joining us, and welcome to CVR Energy's third quarter 2026 earnings call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Richard J. Roberts, Chief Financial Officer. Richard, please go ahead.
Thank you. Good morning, everyone. We very much appreciate you joining us this morning for our CVR Energy third quarter 2026 earnings call. With me today are Dane Neumann, our Chief Executive Officer, Mike Wright, our Chief Operating Officer, and other members of management. Today, we announced our agreement to acquire two refineries from Marathon Petroleum, and we have posted a presentation on the investor relations section of our website. We will refer to that presentation during our prepared remarks. Prior to discussing our 2026 third 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 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 related to such non-GAAP measures, including reconciliation to the most directly comparable GAAP financial measures, are included in our 2026 third quarter earnings release that we filed with the SEC and Form 10-Q for the period, and will be discussed during the call. In addition, our remarks today include forward-looking statements regarding the proposed acquisition, including its expected benefits, synergies, accretion, financing, and timing to close.
These statements are subject to risks and uncertainties, including the satisfaction of customary closing conditions and regulatory clearance, our ability to finance the transaction and to integrate the acquired assets, and the other factors described in our press release and SEC filings. With that said, I'll turn the call over to Dane.
Thank you, Richard. Good morning, everyone, and thank you for joining our earnings call. This is a historic day for CVR Energy, as we announce the largest acquisition in the company's history, along with a record earnings quarter on both a consolidated basis and in the refining segment. We are also pleased to announce a third quarter 2026 dividend of $0.10 per share. We believe current market conditions, along with the platform expansion opportunities afforded by this transaction, generate tailwinds for our business that should create tremendous value for our shareholders. Before Richard takes you through the quarter, I want to spend a few minutes on the news we announced this morning.
Starting on slide two of the presentation, CVR Energy has entered into a definitive agreement to acquire Marathon's St. Paul Park, Minnesota, and Mandan, North Dakota refineries, along with their associated marketing business and certain logistics assets, for total consideration of approximately $4.2 billion, subject to certain customary closing adjustments. The two refineries have a combined nameplate crude capacity of approximately 177,000 barrels per day, with St. Paul Park at 105,000 and Mandan at 72,000. Combined with Coffeyville and Wynnewood, our crude processing capacity would increase from approximately 207,000 to approximately 384,000 barrels per day. This is a transformative acquisition for CVR Energy, nearly doubling our refining capacity, enhancing our geographic scope, and diversifying our distribution footprint through a highly complementary marketing and logistics platform. The transaction implies an asset acquisition multiple of less than 3.5x management's estimate of 2026 EBITDA for the acquired business.
For the nine months ended September 30th, 2026, on a pro forma basis, giving effect to the transaction, CVR's EBITDA increased from approximately $900 million on a standalone basis to approximately $2 billion, and diluted earnings per share increased from $3.73 on a standalone basis to $7.67. Further, we expect the transaction to be greater than 50% accretive to CVR's earnings and free cash flow in the first full year after closing. We intend to fund the transaction with a mix of common equity, cash, and debt, and we plan to redeem our outstanding 2028 senior notes. The equity portion is intended to be funded by a large common equity investment from Trafigura, along with a $500 million equity commitment from IEP and approximately $650 million of cash from the CVI balance sheet.
We have $2.5 billion of committed bridge financing from our banks, which we expect to replace with syndicated secured debt financing prior to closing, and we expect to draw $300 million on an upsized $1.1 billion ABL facility. We also expect to equally and ratably secure our 2031 and 2034 senior notes upon the completion of the permanent financing. Pro forma for the transaction, we expect total debt, excluding CVR Partners, of approximately $3.8 billion at closing, less than 2x our estimated 2026 consolidated pro forma EBITDA. We remain committed to a strong balance sheet, and we intend to capitalize on the above mid-cycle margin environment to further reduce leverage. As the potential transaction is absorbed, we also see potential to substantially improve our corporate credit rating profile.
The transaction has been unanimously approved by our board of directors and is expected to close by year-end 2026, subject to customary closing conditions and regulatory clearance, including expiration of the waiting period under the Hart-Scott-Rodino Act. Turning to slide three, this is a unique opportunity for us to acquire high-quality, geographically advantaged assets from an established operator at a compelling valuation. This transaction would expand our footprint to new geographic areas across the Upper Midwest and Northern Great Plains regions, broadening our exposure to regional transportation fuel demand and expanding our presence across the broader PADD 2 region. From an operations perspective, these assets are similar to what we own and operate today. Medium-sized inland refineries with advantaged crude access via Bakken and Canadian crude oil processing.
They are also well-maintained assets, supported by strong historical investment by Marathon that drove average utilization levels over the past five years in the high 90s. The transaction would include Marathon's associated marketing business, with up to 590 branded locations across the Upper Midwest and Northern Great Plains regions, and longstanding relationships with strategic counterparties. It gives us a diversified distribution mix across gasoline, ultra-low sulfur diesel, jet fuel, and asphalt, and new geographies through a combination of local rack sales and wholesale channels, and a platform for potential expansion into our existing footprint. The business also has high blending capacity, which would increase our internal RIN generation capability and reduce some of our reliance on third-party RIN purchases, potentially further improving the overall RIN exposure of the company on a consolidated basis.
I would also note that Mandan has received a small refinery exemption for 50% of their 2023, 2024, and 2025 obligations. Additionally, a larger, more diversified asset base would support more durable free cash flow through the cycle, enhanced balance sheet flexibility, and more sustainable capital returns. This should also mitigate the volatility inherent in our smaller existing system. We expect to see approximately $70 million in cost and operational synergies on an annual run rate basis. Ultimately, we believe a larger platform improves our positioning for future growth, supported by a larger and more diversified shareholder base. Turning to slide five, we believe this transaction comes at an attractive point in the cycle, with a compelling forward margin environment. The ongoing conflicts in Russia, Ukraine, and the Middle East continue to drive volatility across crude oil and refined product markets.
Disruptive shipping through the Strait of Hormuz, combined with damage to refineries in the Middle East and Russia, continues to constrain global refined product supply. Even if an effective reopening of the Strait eases crude supply constraints, we believe refined product prices could stay elevated for longer, as damaged refineries must be repaired and global inventories rebuilt. We think global supply dislocations and historically low inventory levels support a higher-than-mid-cycle margin environment for at least the next 12-24 months. Looking at the U.S., the domestic refining fleet ran hard in the third quarter as companies deferred maintenance and maximized throughput volumes to keep product supply flowing to meet the needs of consumers. U.S. refinery utilization averaged 96% in the quarter, well above the five-year average of 92% for the same time period.
Despite that high utilization, refined product inventories have continued to decline due to resilient demand trends and increased refined product exports. Domestic gasoline inventories are currently 5% below the five-year average, and distillate inventories are 9% below the five-year average. Exports of gasoline and diesel from the U.S. averaged 2.9 million barrels per day for the third quarter, an increase of nearly 20% from the third quarter of 2025. Slide six shows how PADD 2 refining dynamics reflect similar trends, with supply-demand fundamentals and widening light-heavy differentials supporting margins in the region. Before we speak to our third-quarter results, I want to recognize the employees at St. Paul Park and Mandan, who have built a long record of safe and reliable operations, along with the team at CVR Energy that has worked tirelessly on this transaction.
We look forward to welcoming these new employees to CVR Energy following our closing, and our focus between now and closing will be a seamless transaction for our new colleagues and customers. Let me turn the call over to Richard to discuss our third-quarter results.
Thank you, Dane, and good morning, everyone. Turning to our third-quarter results, highlighted on slide 10. For the third quarter of 2026, our consolidated net income was $563 million, earnings per share was $5.67, and EBITDA was $804 million. Our third-quarter results include a favorable change in our RFS liability of $314 million, favorable inventory valuation impacts of $35 million, and unrealized derivative losses of $127 million. Excluding the above-mentioned items, adjusted EBITDA for the quarter was $582 million, and earnings per share was $4. Adjusted EBITDA in the petroleum segment was $565 million for the third quarter, compared to $120 million for the third quarter of 2025. Elevated Group 3 crack spreads and higher throughput volumes drove the majority of the increase from the prior year period, offset somewhat by higher RIN expenses and realized derivative losses.
Combined total throughput for the third quarter of 2026 was approximately 228,000 barrels per day. Crude utilization for the quarter was approximately 105% of nameplate capacity, and light product yield was 93% on total throughput volumes. The Group 3 2-1-1 averaged $68.50 per barrel for the third quarter of 2026, compared to $25.94 per barrel in the third quarter of 2025. Our third-quarter realized margin, adjusted for the change in RFS liability, inventory valuation, and unrealized derivative losses, was $34.97 per barrel, representing a 51% capture rate on the Group 3 2-1-1 benchmark. RIN prices increased significantly from third-quarter 2025 levels, up over 125% to average over $14 per barrel for the third quarter of 2026.
Net RINs expense for the quarter, excluding the change in RFS liability, was $235 million, or $11.20 per barrel, which negatively impacted our capture rate for the quarter by approximately 16%. The estimated accrued RFS obligation on the balance sheet was $230 million at September 30th, representing 113 million RINs marked to market at an average price of $2.04. We were pleased with the EPA's decision in August to grant Wynnewood Refining Company a full SRE for its 2025 obligation, which reduced the RFS liability on the balance sheet by $253 million. We appreciate EPA's recognition that Wynnewood Refining Company is disproportionately economically harmed by the RFS and deserves full relief.
However, the exorbitant cost of RINs continues to disproportionately harm small and merchant refineries like ours, along with American consumers, as RINs currently represent roughly $0.28 of every gallon at the pump. If the President wants to lower the price of fuel today, he should pull the only lever he can that doesn't need an act of Congress, exercise of the EPA Administrator's existing RFS waiver authority. Our third quarter 2026 results included derivative losses totaling $259 million, comprised of a $133 million realized loss and a $127 million unrealized loss. For the fourth quarter of 2026, we have approximately 2.3 million barrels of diesel hedged, with a total notional value of approximately $93 million. For 2027, we have approximately 3.2 million barrels of diesel hedged fairly ratably across the year.
Direct operating expenses in the petroleum segment were $6.15 per barrel for the third quarter, compared to $5.69 per barrel in the third quarter of 2025. The increase in direct operating expenses per barrel was primarily due to increased personnel expense, largely due to share-based compensation. Adjusted EBITDA in the fertilizer segment was $20 million for the third quarter, compared to $71 million for the prior year period. Ammonia utilization rate was 80%, which was impacted by the plant turnaround at East Dubuque during the quarter. The board of directors of CVR Partners General Partner declared a distribution of $1.79 per common unit for the third quarter of 2026. As CVR Energy owns approximately 37% of CVR Partners' common units, we will receive a proportionate cash distribution of approximately $7 million.
Cash flow from operations for the third quarter of 2026 was $655 million, and free cash flow was $593 million. Significant uses of cash in the quarter included $61 million of capital spending, $46 million of cash interest, $41 million paid for the non-controlling interest portion of the CVR Partners' second quarter 2026 distribution, and $10 million for dividends. Total consolidated capital spending on an accrual basis was $58 million, which included $22 million in the petroleum segment and $35 million in the fertilizer segment. For the full- year 2026, we estimate total consolidated capital spending to be approximately $220 million-$240 million. Turning to the balance sheet, we ended the quarter with a consolidated cash balance of $1.3 billion, which includes $158 million of cash in the fertilizer segment.
Total liquidity as of September 30th, excluding CVR Partners, was approximately $1.7 billion, which was comprised primarily of $1.1 billion of cash and availability under the ABL facility of $530 million. Looking ahead to the fourth quarter of 2026, and excluding the acquired Marathon assets, for our petroleum segment, we estimate total throughputs to be approximately 210,000-225,000 barrels per day, direct operating expenses to range between $115 million and $125 million, and total capital spending to be between $45 million and $55 million. For the fertilizer segment, we estimate our ammonia utilization rate to be between 88% and 93%, which will be impacted by the completion of the East Dubuque turnaround in October. We estimate direct operating expenses, excluding inventory and turnaround impacts, to be between $58 million and $63 million, turnaround expenses to be between $4 million and $6 million, and total capital spending to be between $26 million and $34 million.
With that, Dane, I will turn it back to you.
Thank you, Richard. In summary, we delivered a great quarter in refining, and we remain constructive on the outlook for both segments. I would like to thank our employees for all their hard work during the quarter, delivering crude utilization of 105% and completing the East Dubuque turnaround on the revised schedule. Our third quarter results show the benefits of focusing on safe and reliable operations. We continue to believe this upcycle in refining could persist through 2027, and today's announcement is a clear example of our focus on pursuing accretive growth opportunities intended to add value for our shareholders. We have approached the Marathon acquisition with discipline. We underwrote it on historical mid-cycle earnings rather than today's elevated margins, and at less than 3.5x our estimates of 2026 EBITDA, that includes both refining and marketing.
We consider the transaction to be extremely compelling for CVR Energy through the cycle, with the current environment as upside. Subject to closing, we look forward to welcoming the St. Paul Park and Mandan employees to CVR Energy. With that, operator, we are ready for questions.
We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Matthew Blair with TPH. Your line is open. Please go ahead.
Hi. Thanks, and good morning, and congrats on the strong quarter. I think you mentioned at the end that this transaction was predicated on mid-cycle economics. Maybe you could talk a little bit about what your assumptions are for mid-cycle. If we look back, looks like the MidCon segment for MPC made about $5-$6 a barrel in 2024 and 2025, which I think, if I'm doing the math correctly, would put the EBITDA around $400 million. Does that seem reasonable for a mid-cycle environment, or are you projecting something higher? Thank you.
Hey, Matthew. Yeah, the idea of mid-cycle and refining is something that we talk about every quarter. I would say from a historical basis, not taking into account any of the changes in refining fundamentals recently.
Looking back over a 10-year period, that's typically the way we view mid-cycle. We look at a 10-year period of cracks, adjust that for the RIN components, since the RVO's been so volatile, and then gross that up with the current RIN price on a go-forward basis. We get to a number probably close to double that you threw out, for historical mid-cycle basis on these assets. I think our view is that given all the changes in the global refining supply-demand picture recently, that the go-forward mid-cycle is probably higher than that historical mid-cycle. But I would point out too that the negotiations on these assets started before the Iran war kicked off.
All of the upside that we've seen in the market here recently, and that we're looking forward to for the next couple years most likely, really wasn't factored into the valuation that we had here.
Okay. Sounds good. Could you talk a little bit about the crude slate and the product exposure for the acquired refineries? I think I remember the St. Paul Park refinery running about one-third WCS, so I guess that would put the total crude slate for the package at maybe roughly 20% WCS, 80% Bakken. Is that reasonable? On the product exposure, I thought that these refineries also sold into the MidCon Group 3 product market, like your existing system. What is the good approximation for the split between MidCon and Midwest exposure for the acquired assets on the product side? Thank you.
Matt, this is Dane. Total crude throughput for the acquired assets, let's call it around 175,000 barrels a day. Bakken is about 126,000 of that, just approximately. Total Canadian, just under 50,000 barrels, and half of that Canadian would be WCS or heavy. On the, call it the product side, these assets actually, with their wholesale marketing and strong, call it presence of distribution in the, call it the northern part of the MidCon, there's really historically about 15% of their product that ends up kind of in that bulk market. Substantially lower than ours, and they have significantly more advantaged product placement. Mandan is the only refinery in North Dakota and can place the majority of its product in relatively local areas.
St. Paul Park has a really attractive metropolitan area that allows it to place the majority of its product over the rack. From a marketing perspective, substantially different than what we have in our existing business today, and don't really see a significant amount of overlap or bulk market volumes.
As a reminder, if you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. Your next question comes from the line of Neil Mehta with Goldman Sachs. Your line is open. Please go ahead.
Yeah. Good morning, team, and congrats on the transaction. I had a couple, and then I might queue back in here, which is, the first is just around Mandan. Historically, this has been eligible for a small refinery exemption. Can you remind us that, I believe it's been more partial versus full, but help us size what that's been in terms of a cash flow tailwind, and how'd that feed into the way that you thought about valuing these assets?
Yeah. Thanks, Neil. Yeah, so Mandan has received 50% waivers for the 2023, 2024, 2025 period. In terms of our valuation, we actually did not apply any waivers into the go-forward business, and any waiver received would be upside from our transaction valuation.
That's helpful. Just the follow-up is, how'd you weigh this relative to the path that you were on around deleveraging? Because you had gotten the balance sheet back into a good place at the precipice of reinstating the dividend. So how'd you think about this relative to return of capital?
Yeah. Neil, for us, I think that we've all talked a long time that CVI, just kind of as a standalone business, always suffered from lack of geography, lack of scale, and lack of really controlling the barrel downstream of this. As this opportunity came up, and again, as Richard pointed out, we believe in an elevated period of time of cracks here for the next year or so, or further. Taking a little excess leverage and then using the incremental tailwinds we have from the market to get us back to a more normalized level across the entire fleet became the more accretive option for us.
While there is a little bit of excess leverage, if you think about a mid-cycle level, on a, call it LTM or on a 2026 estimate or what we believe the 2027 environment will look like, seems like a decent leverage target, but we want to continue to work that down over time.
Okay.
If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. Your next question comes from the line of Neil Mehta with Goldman Sachs. Your line is open. Please go ahead.
Okay, I'll queue back in quick. Hey, team. Can you spend a little bit more time talking about the retail side of the business and the marketing side of the business? A lot of us covered Northern Tier back in the day, and I know that was a business they were looking to grow, but just give us a mark- to- market on those assets and how we should be thinking about this.
Yeah, Neil, so just to clarify, it's not a retail business in that we don't own the retail stores. It's more of a-
Or the marketing sales. Yeah. Sorry.
So for one, that's a business we don't have today in our existing assets in the southern MidCon Group 3. So there is some margin that we're giving up between where we're selling in the bulk market and where that product ends up to the ultimate retailer. So by controlling that piece of the value chain, there's some incremental margin that we get to capture there. In addition to that, or as part of that, which is actually a pretty meaningful piece, is the RIN generation that comes along with controlling that piece of the business, along with the significant rack sales relative to what we have today.
I think we mentioned in the prepared remarks, but on a go-forward basis, even not giving credit to the SREs that we've gotten at Wynnewood and that Mandan's received, our consolidated RIN obligation would go down quite a bit just from the additional blending. If you layer in those potential additional SRE benefits, it goes even lower. So, incremental margin there just on controlling more of the barrel and where it goes on top of the additional RIN generation.
Thanks, team.
Your next question comes from the line of Matthew Blair with TPH. Your line is open. Please go ahead.
Long time no talk. Thanks for taking the follow-up. I guess just to clarify on the RIN exposure, are you saying that you can over-blend on these assets, that we actually are, I guess, net long RINs on the acquired assets? Or maybe I'm misinterpreting here.
Yeah. No, Matt. It wouldn't be a net long position. The relative blending capacity of the acquired assets is significantly higher than the relative blending capacity of the CVR assets, predominantly the St. Paul Park with that local rack supplying a substantial portion of their volumes. What the RIN exposure comment is as it relates to the weighted average across the two facilities, our percentage will come down in terms of open exposure pretty dramatically.
Okay. Thank you. Are you expecting any notable capital investments with this acquisition? Just thinking that the St. Paul Park runs a fair amount of WCS, but I believe it still does not have a coker. Would you consider putting in a coker or any other notable capital investments?
Thanks, Matt. I will take that one. We would consider it. I think that there is really, that is a pretty heavy lift in terms of capital dollars, and really, how much more of the value would we capture in that mode? Coffeyville, we do have the benefit of having a gasifier fertilizer business right next door and can get a decent netback, and that is a good synergy, and we probably do not have that as much. It is a pretty big transportation to get it from St. Paul down. There is capital that is planned, and we put all of the capital that was currently planned with Marathon into our future forecasts, and we expect to complete those. They have done a really good job of maintaining those assets and do not see really a lot of makeup capital like you see in some other assets that go on the market.
So, excited about these assets, the way they are well-maintained and reliable, so look forward to working with them. Really, it is more about a successful integration than it is trying to re-kit it right away.
Sounds good. Finally, is there any sort of earn-out on the transaction?
No, sir.
Thank you.
You got it, Matt.
We have reached the end of the Q&A session. I will now turn the call back to Dane for closing remarks.
All right. Again, I would like to thank you all for your interest in CVR Energy and our employees for their hard work and commitment towards safe, reliable, and environmentally responsible operations. We look forward to reviewing our fourth quarter 2026 results during our next call in a couple months. Have a safe day.
This concludes today's call. Thank you for attending. You may now disconnect.