CVR ENERGY INC

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 21, 2024 (the “2023 Form 10-K”), and the unaudited condensed consolidated financial statements and related notes and with the statistical information and financial data appearing in this Report. Results of operations for the three months ended March 31, 2024 and cash flows for the three months ended March 31, 2024 are not necessarily indicative of results to be attained for any other period. See “Important Information Regarding Forward-Looking Statements.” References to “CVR Energy”, the “Company”, “we”, “us”, and “our”, may refer to consolidated subsidiaries of CVR Energy, including CVR Refining, LP or CVR Partners, LP, as the context may require.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 21, 2024 (the “2023 Form 10-K”), and the unaudited condensed consolidated financial statements and related notes and with the statistical information and financial data appearing in this Report. Results of operations for the three and six months ended June 30, 2024 and cash flows for the six months ended June 30, 2024 are not necessarily indicative of results to be attained for any other period. See “Important Information Regarding Forward-Looking Statements.” References to “CVR Energy”, the “Company”, “we”, “us”, and “our”, may refer to consolidated subsidiaries of CVR Energy, including CVR Refining, LP or CVR Partners, LP, as the context may require.

Previous wording

Geopolitical Matters - The conflict in the Middle East, which began in October 2023 and continues to escalate, and the ongoing Russia-Ukraine war, can significantly impact global oil, fertilizer, and agriculture markets. These conflicts pose significant geopolitical risks to global markets, raise concerns of major implications, such as the enforcement of sanctions, and could contribute to further oil inventory tightening and price volatility, and disrupt the production and trade of fertilizer, grains, and feedstock through several means, such as trade restrictions. The ultimate outcome of these conflicts, or further escalation or expansion thereof, and any associated market disruptions are difficult to predict and may affect our business, operations, and cash flows in unforeseen ways.

Current wording

Geopolitical Matters - The conflict in the Middle East, which began in October 2023 and may continue to escalate, and the ongoing Russia-Ukraine war can significantly impact global oil, fertilizer, and agriculture markets. These conflicts pose significant geopolitical risks to global markets, raise concerns of major implications, such as the enforcement of sanctions, could contribute to further oil inventory tightening and price volatility, and disrupt the production and trade of fertilizer, grains, and feedstock through several means, such as trade restrictions. The ultimate outcome of these conflicts, or further escalation or expansion thereof, and any associated market disruptions are difficult to predict and may affect our business, operations, and cash flows in unforeseen ways.

Previous wording

Regulatory Environment - There have been several proposed climate related rules, in various stages of approval, that, if finalized, would demand considerable efforts to drive new compliance requirements and could impact our disclosure controls and procedures as well as include additional disclosures in our regulatory filings.

Current wording

Regulatory Environment - There have been several proposed and enacted climate-related rules, in various stages of approval, that, if finalized, would demand considerable efforts to comply with new compliance requirements and could impact our disclosure controls and procedures as well as require additional disclosures in our regulatory filings. In addition, the current political environment provides uncertainty regarding existing and future laws, regulations, policies, or rulings, including the reinterpretation or amplification thereof by regulators, which may impact our business, operations, compliance costs, and market stability.

Previous wording

The prices of crude oil and other feedstocks and refined products are also affected by other factors, such as product pipeline capacity, system inventory, local and regional market conditions, inflation, and the operating levels of other refineries. Crude oil costs and the prices of refined products have historically been subject to wide fluctuations. Widespread expansion or upgrades of third-party facilities, price volatility, international political and economic developments, and other factors are likely to continue to play an important role in refining industry economics. These factors can impact, among other things, the level of inventories in the market, resulting in price volatility and a reduction in product margins. Moreover, the refining industry typically experiences seasonal fluctuations in demand for refined products, such as increases in the demand for gasoline during the summer driving season and for volatile seasonal exports of diesel from the United States Gulf Coast. After substantial declines in demand for gasoline and diesel due to the COVID-19 pandemic in 2020, the combination of improving demand, declining inventories, loss of domestic and foreign operating refining capacities, and conversions to renewable diesel facilities led to an increase in refined products prices and crack spreads during 2022 and 2023. Specific factors impacting the Company’s operations are outlined below.

Current wording

The prices of crude oil and other feedstocks and refined products are also affected by other factors, such as product pipeline capacity, system inventory, local and regional market conditions, inflation, and the operating levels of other refineries. Crude oil costs and the prices of refined products have historically been subject to wide fluctuations. Widespread expansion or upgrades of third-party facilities, price volatility, international political and economic developments, and other factors are likely to continue to play an important role in refining industry economics. These factors can impact, among other things, the level of inventories in the market, resulting in price volatility and a reduction in product margins. Moreover, the refining industry typically experiences seasonal fluctuations in demand for refined products, such as increases in the demand for gasoline during the summer driving season and for volatile seasonal exports of diesel from the United States Gulf Coast. Specific factors impacting the Company’s operations are outlined below.

Previous wording

•While the refining market has largely recovered since the pandemic, refined product demand declined 4% nationwide in the first quarter of 2024 from the pre-pandemic first quarter of 2019. Group 3 demand has been relatively consistent compared to other parts of the country following the pandemic. Crack spreads have since normalized, and we characterize current crack spreads just above mid-cycle levels.

Current wording

•While the refining market has largely recovered since the pandemic, refined product demand declined 1% nationwide in the second quarter of 2024 from the pre-pandemic second quarter of 2019. Group 3 demand has been relatively consistent compared to other parts of the country following the pandemic. We characterize current crack spreads just below mid-cycle levels.

Previous wording

•Winter 2023/2024 weather was warmer than average in Europe and, when combined with natural gas conservation measures, caused demand and prices for natural gas to fall significantly in the region, which contributed to the flattening of the global cost curve and has reduced the U.S. refiners’ advantage compared to refiners in Europe.

Current wording

•Winter 2023/2024 weather was warmer than average in North America and Europe and, when combined with natural gas conservation measures, has caused demand and prices for natural gas to fall significantly, which contributed to the flattening of the global cost curve and has reduced the U.S. refiners’ advantage compared to refiners in Europe.

Previous wording

•Industrial production has slowed since the second half of 2023, and truck, rail, and ship tonnage and freight volumes were reduced, which reduced distillate pricing in the fourth quarter of 2023 and continuing into 2024. In addition, distillate crack spreads continue to be pressured by the low price levels of natural gas causing a lack of distillate demand to generate electricity around the world. Gasoline and distillate pricing declined significantly through the end of the quarter.

Current wording

•Industrial production has slowed since the second half of 2023, and truck, rail, and ship tonnage and freight volumes were reduced, which reduced distillate pricing in the fourth quarter of 2023 and continued into 2024. In addition, distillate crack spreads continue to be pressured by the low price levels of natural gas causing a lack of distillate demand to generate electricity around the world. Moreover, new LNG projects coming online and expansion of export capacity in the U.S. has contributed to the increase of global supply of natural gas and thus downward pressure on prices, and may also support fleet shifting from diesel to LNG. Gasoline and distillate pricing declined significantly through the end of the second quarter.

Previous wording

•Refining capacity is increasing significantly around the world. Major projects have started up in the Middle East and Asia and others are in progress, specifically in Mexico and Africa. While these ongoing projects may encounter various challenges and come to market slower than anticipated, they should eventually impact global oil and refined product flows. At the same time, these capacity expansions could be offset by additional renewable diesel conversions and further refinery fleet rationalization through planned shutdowns or currently unplanned shutdowns due to future economic constraints given refined product consumption is slowing in the United States and remains weak in Europe.

Current wording

•Refining capacity is increasing significantly around the world. Major projects have started up in the Middle East and Asia and others are in progress, specifically in Mexico and Africa. Refining capacity in the U.S. has also increased approximately 500,000 bpd from pandemic levels mainly due to expansion projects. While these ongoing projects may encounter various challenges and come to market slower than anticipated, they should eventually impact global oil and refined product flows. At the same time, these capacity expansions could be offset by additional renewable diesel conversions and further refinery fleet rationalization through planned shutdowns or currently unplanned shutdowns due to future economic constraints given refined product consumption is slowing in the United States and remains weak in Europe.

Previous wording

•While renewable identification number (“RIN”) prices increased slightly at the end of the first quarter of 2024, they are still lower than the first quarter of 2023. Production of renewable fuels continues to increase as new plants start up, which we expect to continue through 2025. We also expect biomass-based diesel RIN (“D4”) production to exceed the renewable volume obligation (“RVO”) significantly going forward, creating a RIN surplus. In June 2023, the Environmental Protection Agency (“EPA”) set the D4 RVO for 2023, 2024, and 2025 at 2.82, 3.04, and 3.35 billion, respectively.

Current wording

•While renewable identification number (“RIN”) prices increased slightly at the end of the second quarter of 2024, they are still lower than the second quarter of 2023. Production of renewable fuels continues to increase as new plants start up, which we expect to continue through 2025. We also expect biomass-based diesel RIN (“D4”) production to exceed the renewable volume obligation (“RVO”) significantly going forward, creating a RIN surplus. In June 2023, the Environmental Protection Agency (“EPA”) set the D4 RVO for 2023, 2024, and 2025 at 2.82, 3.04, and 3.35 billion, respectively.

Previous wording

•Electric vehicle penetration of new vehicle sales in the U.S. light vehicle market has increased significantly, up approximately 25% from 2023. In 2022, miles per gallon of the new auto fleet continued to increase, averaging 26 miles per gallon (“MPG”). The EPA expects the new fleet average to have increased in 2023 by approximately 1 MPG. Vehicle miles traveled continues to increase but the effect of electric vehicle penetration in the fleet is clear and present. We expect this trend to continue.

Current wording

•In the second quarter of 2024, new electric vehicle sales in the U.S. increased approximately 11% from the second quarter of 2023. In 2022, miles per gallon of the new auto fleet continued to increase, averaging 26 miles per gallon (“MPG”). The EPA expects the new fleet average to have increased in 2023 by approximately 1 MPG. Vehicle miles traveled continues to increase but the effect of electric vehicle penetration in the fleet is clear and present. We expect this trend to continue.

Previous wording

EPA’s unlawful failure to establish the RVOs by their statutory deadlines, its subsequent promulgation of RVOs exceeding the blendwall, its delay in issuing decisions on pending small refinery exemption (“SRE”) petitions, its subsequent denial of those SRE petitions and its failure to designate blenders as obligated parties under the RFS. Our costs to comply with the RFS are also impacted by, and dependent upon the outcome of, the numerous lawsuits filed by multiple refiners including our obligated-party subsidiaries, biofuels groups and others. Refer to Part I, Item 1, Note 13 (“Commitments and Contingencies”) in this Report. Wynnewood Refining Company, LLC filed its SRE petition for 2023, which has not yet been ruled on by the EPA despite the 90-day deadline for the EPA to rule on SRE petitions applicable under the law. As a result, our costs to comply with RFS (excluding the impacts of any exemptions or waivers to which the Petroleum Segment’s obligated-party subsidiaries may be entitled) increased significantly throughout 2022, remained significant in 2023 and is expected to remain significant through 2024 and beyond.

Current wording

•Certain of the Petroleum Segment’s subsidiaries are subject to the RFS (collectively, the “obligated-party subsidiaries”), which, each year, absent exemptions or waivers, requires such obligated-party subsidiaries to blend renewable fuels with transportation fuels, purchase RINs in lieu of blending, or otherwise face liability. Our cost to comply with the RFS is dependent upon a variety of factors, which include but are not limited to the availability of ethanol and biodiesel for blending at our refineries and downstream terminals or RINs for purchase, the actions of RIN market participants including non-obligated parties, the price at which RINs can be purchased, transportation fuel and renewable diesel production levels and pricing including potential discounts thereto related to the RFS, the mix of our products, our refining margins and other factors, all of which can vary significantly from period to period, as well as certain waivers or exemptions to which we may be entitled. Our costs to comply with the RFS further depend on the consistent, timely, and legal administration of the RFS program by the EPA, including the EPA’s unlawful failure to establish the RVOs by their statutory deadlines, its subsequent promulgation of RVOs exceeding the blendwall, its delay in issuing decisions on pending small refinery exemption (“SRE”) petitions, its subsequent denial of those SRE petitions and its failure to designate blenders as obligated parties under the RFS. Our costs to comply with the RFS are also impacted by, and dependent upon the outcome of, the numerous lawsuits filed by multiple refiners including our obligated-party subsidiaries, biofuels groups and others. Refer to Part I, Item 1, Note 13 (“Commitments and Contingencies”) in this Report. Wynnewood Refining Company, LLC filed its SRE petition for 2023, which has not yet been ruled on by the EPA despite the 90-day deadline for the EPA to rule on SRE petitions applicable under the law. As a result, our costs to comply with RFS (excluding the impacts of any exemptions or waivers to which the Petroleum Segment’s obligated-party subsidiaries may be entitled) increased significantly throughout 2022, remained significant in 2023 and is expected to remain significant through 2024 and beyond.

Previous wording

•In March 2024, the EPA finalized new motor vehicle emissions standards for light-, medium-, and heavy-duty vehicles for model year 2027 and beyond. New heavy-truck requirements are also being proposed. As a result of these new standards, the EPA expects EVs will account for 68% of new light-duty vehicles by model year 2032. In the United States in 2023, approximately 7.6% of new-vehicle sales were EVs.

Current wording

•In March 2024, the EPA finalized new motor vehicle emissions standards for light-, medium-, and heavy-duty vehicles for model year 2027 and beyond. New heavy-truck requirements are also being proposed. As a result of these new standards, the EPA expects EVs will account for 68% of new light-duty vehicles by model year 2032. In the United States in the second quarter of 2024, approximately 8% of new-vehicle sales were EVs.

Previous wording

•Our Wynnewood Refinery has a renewable diesel unit and a pretreatment unit. The renewable diesel unit at the Wynnewood Refinery has the flexibility to be returned to hydrocarbon processing service primarily through a catalyst change depending on market conditions including but not limited to renewable diesel margins, contractual obligations and other factors. The pretreatment unit should lower our feedstock costs and enable us to process a wider variety of renewable diesel feedstocks at the Wynnewood Refinery, most of which have a lower carbon intensity than soybean oil and generate additional LCFS credits. With our existing renewable diesel production, this could mitigate a substantial majority, if not all, of our future RFS exposure for our Coffeyville Refinery, and we continue to seek, and pursue in court, SREs for our Wynnewood Refinery. We continue to look at a project to produce sustainable aviation fuels at our Wynnewood Refinery assuming we can find a third-party for a guaranteed off take at a formula price.

Current wording

•Our Wynnewood Refinery has a renewable diesel unit and a pretreatment unit. The renewable diesel unit at the Wynnewood Refinery has the flexibility to be returned to hydrocarbon processing service primarily through a catalyst change depending on market conditions including but not limited to renewable diesel margins, contractual obligations and other factors. The pretreatment unit is designed to lower our feedstock costs and enable us to process a wider variety of renewable diesel feedstocks at the Wynnewood Refinery, most of which have a lower carbon intensity than soybean oil and generate additional Low Carbon Fuel Standard credits. With our existing renewable diesel production, this could mitigate the majority, if not all, of our future RFS exposure for our Coffeyville Refinery as long as the unit is kept in renewable fuel service and operating at capacity. We continue to seek, and pursue in court, SREs for our Wynnewood Refinery, and have also been assessing a project to produce sustainable aviation fuels at this plant assuming we can find a third-party for a guaranteed off take at a formula price.

Previous wording

•The Company is evaluating a potential renewables project near its Coffeyville location, the approval of which would be subject to numerous conditions and requirements including, but not limited to, approval of our Board, regulators, and potential other third parties, including our ability to enter into an agreement with third parties to fund such project. This project, if approved and pursued, could enable the capture of synergies with the Petroleum Segment as our refinery in Coffeyville, Kansas (“Coffeyville Refinery”) has excess hydrogen capacity as well as potential access to third-party carbon capture use and storage.

Current wording

•The Company is evaluating a potential renewables project near its Coffeyville location, the approval of which would be subject to numerous conditions and requirements including, but not limited to, approval of our Board, regulators, and potential other third parties, including our ability to enter into an agreement with third parties to fund such project. This project, if approved and pursued, could enable the capture of synergies with the Petroleum Segment as our Coffeyville Refinery has excess hydrogen capacity as well as potential access to third-party carbon capture use and storage.

Previous wording

•The Company entered into an agreement with an unaffiliated party to build and install a fuel-by-rail facility at a property adjacent to the Coffeyville Refinery intended to allow the Company to sell product to customers that ship refined products to higher priced markets primarily in PADD IV and V. This unaffiliated party is expected to operate the facility under a take-or-pay agreement for an initial term of two years following commencement.

Current wording

•As part of an agreement the Company entered into with an unaffiliated party, a fuel-by-rail facility was built during the first quarter of 2024 at a property adjacent to the Coffeyville Refinery intended to allow the Company to sell product to customers that ship refined products to higher priced markets primarily in PADD IV and V. This unaffiliated party has operated the facility under a take-or-pay agreement for an initial term of two years.

Previous wording

•The Company has undertaken a project to replace the hydrofluoric acid catalyst in the alkylation unit at its Wynnewood Refinery with a fixed bed catalyst system, which should expand the alkylation unit by approximately 2,500 bpd, increase product capture by reducing propylene production and increase production of premium gasoline, and eliminate hydrofluoric acid inventory onsite. The capital investment is estimated at $136 million and the project should eliminate the need for expanding the hydrofluoric acid mitigation system, which would have had an estimated cost of approximately $45 million.

Current wording

•The Company has undertaken a project to replace the hydrofluoric acid catalyst in the alkylation unit at its Wynnewood Refinery with a fixed bed catalyst system, which should expand the alkylation unit by approximately 2,500 bpd, increase product capture by reducing propylene production and increase production of premium gasoline, and eliminate hydrofluoric acid inventory onsite. The capital investment is estimated at $136 million.

Previous wording

•In April 2024, the Board approved the Distillate Yield Improvement Project at the Wynnewood Refinery to modify one of the vacuum towers, which may increase distillate production at Wynnewood by up to approximately 4,000 bpd. Final completion is currently expected in the first half of 2025 at a capital cost of less than $15 million. The Company is also studying a similar project at Coffeyville which, if approved by the Board and successfully implemented, could be completed in 2026.

Current wording

•In April 2024, the Board approved the Distillate Yield Improvement Project at the Wynnewood Refinery to modify one of the vacuum towers, which may increase distillate production at Wynnewood by up to approximately 4,000 bpd. Final completion is currently expected in 2026 at a capital cost of less than $15 million. The Company is also studying a similar project at Coffeyville which, if approved by the Board and successfully implemented, the first phase could be completed in 2025/2026.

Previous wording

As of March 31, 2024, we have an estimated liability of $294 million for the Petroleum Segment’s obligated-party subsidiaries compliance with the RFS for 2020 through 2024, which consists of approximately 449 million RINs, excluding open, fixed-price commitments to purchase a net 16 million RINs. The Company’s open RFS position, which does not consider open commitments expected to settle in future periods or the impact of any waivers or exemptions, is marked-to-market each period and thus significant market volatility, as experienced in late 2022, 2023, and 2024 to date, could impact our RFS expense from period to period.

Current wording

As of June 30, 2024, we have an estimated liability of $312 million for the Petroleum Segment’s obligated-party subsidiaries compliance with the RFS for 2020 through 2024, which consists of approximately 471 million RINs, excluding open, fixed-price commitments to purchase a net 12 million RINs. The Company’s open RFS position, which does not consider open commitments expected to settle in future periods or the impact of any waivers or exemptions, is marked-to-market each period at spot price and thus significant market volatility, as experienced in late 2022, 2023, and 2024 to date, could impact our RFS expense from period to period.

Previous wording

Both NYMEX 2-1-1 and Group 3 2-1-1 crack spreads decreased during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The NYMEX 2-1-1 crack spread averaged $29.71 per barrel during the three months ended March 31, 2024 compared to $38.37 per barrel in the three months ended March 31, 2023. The Group 3 2-1-1 crack spread averaged $19.55 per barrel during the three months ended March 31, 2024 compared to $34.16 per barrel during the three months ended March 31, 2023.

Current wording

Both NYMEX 2-1-1 and Group 3 2-1-1 crack spreads decreased during the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The NYMEX 2-1-1 crack spread averaged $27.85 per barrel during the six months ended June 30, 2024 compared to $35.32 per barrel in the six months ended June 30, 2023. The Group 3 2-1-1 crack spread averaged $19.17 per barrel during the six months ended June 30, 2024 compared to $33.10 per barrel during the six months ended June 30, 2023.

Previous wording

Average monthly prices for RINs decreased 54.6% during the first quarter of 2024 compared to the same period of 2023. On a blended barrel basis (calculated using applicable RVO percentages), RINs approximated $3.68 per barrel during the first quarter of 2024 compared to $8.11 per barrel during the first quarter of 2023.

Current wording

Average monthly prices for RINs decreased 55.7% during the second quarter of 2024 compared to the same period of 2023. On a blended barrel basis (calculated using applicable RVO percentages), RINs approximated $3.39 per barrel during the second quarter of 2024 compared to $7.64 per barrel during the second quarter of 2023.

Previous wording

Certain governmental regulations and incentives associated with the automobile transportation and agricultural industries, including the ones related to corn-based ethanol and sustainable aviation fuel production or consumption can directly impact our business. In June 2023, the EPA announced the renewable volume obligations for 2023, 2024, and 2025 which maintained the conventional biofuel blending level at 15 billion gallons. These actions lead us to believe that the demand on food, in particular corn, for fuel will remain strong for the foreseeable future and support farmer economics that incentivize the use of nitrogen-based fertilizers.

Current wording

Certain governmental regulations and incentives associated with the automobile transportation and agricultural industries, including the ones related to corn-based ethanol and sustainable aviation fuel production or consumption, can, and have, directly impact our business. In June 2023, the EPA announced the renewable volume obligations for 2023, 2024, and 2025 which maintained the conventional biofuel blending level at 15 billion gallons. These actions lead us to believe that the demand on food, in particular corn, for fuel will remain strong for the foreseeable future and support farmer economics that incentivize the use of nitrogen-based fertilizers.

Previous wording

The relationship between the total acres planted for both corn and soybeans has a direct impact on the overall demand for nitrogen products, as the market and demand for nitrogen increases with increased corn acres and decreases with increased soybean acres. Additionally, an estimated 13 billion pounds of soybean oil is expected to be used in producing cleaner renewable fuels in marketing year 2023/2024. Multiple refiners have announced renewable diesel expansion projects for 2024 and beyond, which should only increase the demand for soybeans and potentially for corn and canola.

Current wording

The relationship between the total acres planted for both corn and soybeans has a direct impact on the overall demand for nitrogen products, as the market and demand for nitrogen increases with increased corn acres and decreases with increased soybean acres. Additionally, an estimated 14 billion pounds of soybean oil is expected to be used in producing cleaner renewable fuels in marketing year 2024/2025. Multiple refiners have announced renewable diesel expansion projects for 2024 and beyond, which should only increase the demand for soybeans and potentially for corn and canola.

Previous wording

The United States Department of Agriculture (“USDA”) estimates that in spring 2024 farmers will plant 90 million corn acres, representing a decrease of 5% compared to 95 million corn acres in 2023. Planted soybean acres are estimated to be 87 million, representing an increase of 3% compared to 84 million soybean acres in 2023. The combined estimated corn and soybean planted acres of 177 million represents a decrease of 1% compared to the acreage planted in 2023. Due to lower input costs in 2024 for corn planting and the relative grain prices of corn versus soybeans, economics have favored planting corn compared to soybeans in 2024. Inventory levels of corn and soybeans are expected to be supportive of grain prices for the remainder of 2024.

Current wording

The United States Department of Agriculture (“USDA”) estimates that in spring 2024 farmers planted 91 million corn acres, representing a decrease of 3% compared to 95 million corn acres in 2023. Planted soybean acres are estimated to be 86 million, representing an increase of 3% compared to 84 million soybean acres in 2023. The combined estimated corn and soybean planted acres of 178 million represents a nominal decrease compared to the acreage planted in 2023. Due to lower input costs in 2024 for corn planting and the relative grain prices of corn versus soybeans, economics have favored planting corn compared to soybeans in 2024. Inventory levels of corn and soybeans are expected to be supportive of grain prices for the remainder of 2024.

Previous wording

Fertilizer input costs have been volatile since the fall of 2021. Natural gas prices were elevated in the fall of 2022 due to shortages in Europe and demand being driven by building natural gas storage for winter. Winter 2022/2023 weather was warmer than average in Europe and, when combined with natural gas conservation measures, caused demand and prices for natural gas in Europe to fall significantly in the first quarter of 2023 and remain below the 2021/2022 price levels. The decline in natural gas prices, and the resulting capacity curtailments, among other factors, has led to a significant reduction in the price for nitrogen fertilizer from peak prices. While we expect that natural gas prices might remain below the elevated levels experienced in 2022 in the near term, we believe that the structural shortage of natural gas in Europe will continue to be a source of volatility for the rest of 2024 through 2026. Although pet coke prices elevated since 2021 due to higher natural gas prices compared to historical levels, as natural gas prices fell in 2023, third-party pet coke prices have declined into 2024.

Current wording

Fertilizer input costs have been volatile since the fall of 2021. Natural gas prices were elevated in the fall of 2022 due to shortages in Europe and demand being driven by building natural gas storage for winter. Winter 2022/2023 weather was warmer than average in Europe and, when combined with natural gas conservation measures, caused demand and prices for natural gas in Europe to fall significantly in the first quarter of 2023 and remain below the 2021/2022 price levels. The decline in natural gas prices, and the resulting capacity curtailments, among other factors, has led to a significant reduction in the price for nitrogen fertilizer from peak prices. While we expect that natural gas prices might remain below the elevated levels experienced in 2022 in the near term, we believe that the structural shortage of natural gas in Europe will continue to be a source of volatility for the rest of 2024 through 2026. Although pet coke prices have been elevated since 2021 due to higher natural gas prices compared to historical levels, as natural gas prices fell in 2023, third-party pet coke prices have declined into 2024.

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Consolidated Financial Highlights (Three Months Ended March 31, 2024 versus March 31, 2023)

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Consolidated Financial Highlights (Three and Six Months Ended June 30, 2024 versus June 30, 2023)

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Three Months Ended March 31, 2024 versus March 31, 2023 (Consolidated)

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Three and Six Months Ended June 30, 2024 versus June 30, 2023 (Consolidated)

Previous wording

Overview -For the three months ended March 31, 2024, the Company’s operating income and net income were $123 million and $90 million, respectively, compared to operating income and net income of $330 million and $259 million, respectively, during the three months ended March 31, 2023. Refer to our discussion of each segment’s results of operations below for further information.

Current wording

Overview -For the three months ended June 30, 2024, the Company’s operating income and net income were $27 million and $38 million, respectively, compared to operating income and net income of $224 million and $168 million, respectively, for the three months ended June 30, 2023. For the six months ended June 30, 2024, the Company’s operating income and net income were $149 million and $128 million, respectively, compared to operating income and net income of $554 million and $427 million, respectively, for the six months ended June 30, 2023. Refer to our discussion of each segment’s results of operations below for further information.

Previous wording

Income Tax Expense - Income tax expense for the three months ended March 31, 2024 was $17 million, or 15.9% of income before income tax, compared to income tax expense for the three months ended March 31, 2023 of $56 million, or 17.8% of income before income tax. The decrease in income tax expense was primarily due to a decrease in overall pretax earnings from the three months ended March 31, 2023 to the three months ended March 31, 2024. In addition, the change in the effective tax rate was primarily due to changes in pretax earnings attributable to noncontrolling interest and the impact of federal and state tax credits and incentives in relation to overall pretax earnings from the three months ended March 31, 2023 to the three months ended March 31, 2024.

Current wording

Income Tax (Benefit) Expense - Income tax benefit for the three and six months ended June 30, 2024 was $26 million and $10 million, or (219.7)% and (7.2)% of income before income tax, respectively, compared to income tax expense for the three and six months ended June 30, 2023 of $44 million and $101 million, or 20.9% and 19.1% of income before income tax, respectively. The decrease in income tax expense was primarily due to a decrease in overall pretax earnings from the three and six months ended June 30, 2023 to the three and six months ended June 30, 2024. In addition, the change in the effective tax rate was primarily due to changes in pretax earnings attributable to noncontrolling interest and the impact of federal and state tax credits and incentives in relation to overall pretax earnings from the three and six months ended June 30, 2023 to the three and six months ended June 30, 2024.

Previous wording

Petroleum Segment Financial Highlights (Three Months Ended March 31, 2024 versus March 31, 2023)

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Petroleum Segment Financial Highlights (Three and Six Months Ended June 30, 2024 versus June 30, 2023)

Previous wording

Overview - For the three months ended March 31, 2024, the Petroleum Segment’s operating income and net income were $118 million and $127 million, respectively, compared to operating income and net income of $237 million and $259 million, respectively, for the three months ended March 31, 2023. These declines were primarily due to a decline in gasoline and distillate crack spreads and an unfavorable derivatives impact in the current period, partially offset by lower RFS related expenses.

Current wording

Overview - For the three months ended June 30, 2024, the Petroleum Segment’s operating income and net income were $10 million and $18 million, respectively, compared to operating income and net income of $171 million and $194 million, respectively, for the three months ended June 30, 2023. These declines were primarily due to decreases in gasoline and distillate crack spreads, along with decreased production and increased maintenance resulting from a fire at the Wynnewood Refinery in April 2024 (the “Wynnewood Fire”). These variances were partially offset by lower RFS related expenses and a favorable derivatives impact in the current period. For the six months ended June 30, 2024, the Petroleum Segment’s operating income and net income were $128 million and $145 million, respectively, compared to operating income and net income of

Previous wording

Net Sales - For the three months ended March 31, 2024, net sales for the Petroleum Segment was $1.7 billion compared to $2.0 billion for the three months ended March 31, 2023. The decrease in net sales was driven by lower refined product prices resulting from elevated inventory levels and reduced demand during the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Current wording

Net Sales - For the three and six months ended June 30, 2024, net sales for the Petroleum Segment was $1.8 billion and $3.5 billion, respectively, compared to $2.0 billion and $4.0 billion for the three and six months ended June 30, 2023, respectively. The decrease in net sales for both periods was driven by lower refined product prices resulting from elevated inventory levels and reduced demand, along with fewer sales as a result of the Wynnewood Fire.

Previous wording

Refining Margin -For the three months ended March 31, 2024, refining margin was $290 million, or $16.29 per throughput barrel, compared to $411 million, or $23.24 per throughput barrel, for the three months ended March 31, 2023. The primary factors contributing to the $121 million decrease in refining margin were:

Current wording

Refining Margin -For the three months ended June 30, 2024, refining margin was $185 million, or $10.94 per throughput barrel, compared to $333 million, or $18.21 per throughput barrel, for the three months ended June 30, 2023. The primary factors contributing to the $148 million decrease in refining margin were:

Previous wording

•A decrease in the Group 3 2-1-1 crack spread of $14.61 per barrel, driven by a tightening of gasoline and distillate crack spreads primarily due to increased inventory levels and lower demand in the current year; and

Current wording

•A decrease in the Group 3 2-1-1 crack spread of $13.20 per barrel, driven by a tightening of gasoline and distillate crack spreads primarily due to increased inventory levels and lower demand in the current year; and

Previous wording

•A decline in RFS related expense of $85 million, which includes a reduction in RINs revaluation impact of $35 million; and

Current wording

•A decline in RFS related expense of $51 million, which includes favorable RINs revaluation adjustments of $2 million; and

Previous wording

•Favorable inventory valuation impacts of $37 million for the three months ended March 31, 2024 compared to unfavorable inventory valuation impacts of $12 million for the three months ended March 31, 2023, primarily due to rising crude oil prices in the current period compared to falling crude oil prices in the first quarter of 2023.

Current wording

•Favorable inventory valuation impacts of $2 million for the three months ended June 30, 2024 compared to unfavorable inventory valuation impacts of $21 million for the three months ended June 30, 2023, primarily due to rising crude oil prices in the current period compared to falling crude oil prices in the second quarter of 2023.

Previous wording

•Unfavorable derivative impacts of $57 million from losses on open crack spread swap positions in the current period compared to gains in the first quarter of 2023.

Current wording

•Unfavorable derivative impacts of $37 million from smaller gains on open crack spread swap positions in the current period compared to the six months ended June 30, 2023.

Previous wording

Direct Operating Expenses (Exclusive of Depreciation and Amortization) -For the three months ended March 31, 2024, direct operating expenses (exclusive of depreciation and amortization) was $103 million compared to $104 million for the three months ended March 31, 2023. The decrease for the three months ended March 31, 2024 was primarily due to lower natural gas and electricity costs. On a total throughput barrel basis, direct operating expenses decreased to $5.78 per barrel for the three months ended March 31, 2024 from $5.90 per barrel for the three months ended March 31, 2023. The decrease was primarily due to increased throughput for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Current wording

Direct Operating Expenses (Exclusive of Depreciation and Amortization) -For the three and six months ended June 30, 2024, direct operating expenses (exclusive of depreciation and amortization) was $118 million and $221 million, respectively, compared to $100 million and $204 million for the three and six months ended June 30, 2023, respectively. The increases for the three and six months ended June 30, 2024 were primarily due to increased repairs and maintenance. On a total throughput barrel basis, direct operating expenses increased to $6.94 and $6.34 per barrel for the three and six months ended June 30, 2024, respectively, from $5.46 and $5.68 per barrel for the three and six months ended June 30, 2023, respectively. The increases were primarily due to increased maintenance and decreased throughput for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023.

Previous wording

Selling, General, and Administrative Expenses, and Loss on Asset Disposal- For the three months ended March 31, 2024, selling, general and administrative expenses, and loss on asset disposal was $21 million compared to $24 million for the three months ended March 31, 2023. The decrease for the three months ended March 31, 2024 was primarily due to a decrease in legal and consulting services.

Current wording

Selling, General, and Administrative Expenses, and Loss on Asset Disposal- For the three and six months ended June 30, 2024, selling, general and administrative expenses, and loss on asset disposal was $14 million and $35 million, respectively, compared to $17 million and $41 million for the three and six months ended June 30, 2023, respectively. The decreases for both periods were primarily due to a decrease in consulting services and share-based compensation as a result of a decrease in the market price of CVR Energy’s common share, as well as decreased legal services expense during the six months ended June 30, 2024.

Previous wording

Gross tons of ammonia represent the total ammonia produced, including ammonia produced that was upgraded into other fertilizer products. Net tons available for sale represents the ammonia available for sale that was not upgraded into other fertilizer products. The table below presents all of these Nitrogen Fertilizer Segment metrics for the three months ended March 31, 2024 and 2023:

Current wording

Gross tons of ammonia represent the total ammonia produced, including ammonia produced that was upgraded into other fertilizer products. Net tons available for sale represents the ammonia available for sale that was not upgraded into other fertilizer products. The table below presents all of these Nitrogen Fertilizer Segment metrics for the three and six months ended June 30, 2024 and 2023:

Previous wording

On a consolidated basis for the three months ended March 31, 2024, the Nitrogen Fertilizer Segment’s utilization decreased to 90% compared to 105% for the three months ended March 31, 2023. The decrease was primarily due to the 14-day planned downtime at the Coffeyville Fertilizer Facility in the current period.

Current wording

On a consolidated basis for the three months ended June 30, 2024, the Nitrogen Fertilizer Segment’s utilization increased to 102% compared to 100% for the three months ended June 30, 2023 due to the facilities operating largely as planned with reduced downtime compared to the prior period. For the six months ended June 30, 2024, utilization decreased to 96% compared to 103% for the six months ended June 30, 2023 primarily due to the 14-day planned outage at the Coffeyville Fertilizer Facility during the first quarter of 2024.