CVR ENERGY INC

(13) Commitments and Contingencies

In the ordinary course of business, the Company may become party to lawsuits, administrative proceedings, and governmental investigations, including environmental, regulatory, and other matters. The outcome of these matters cannot always be predicted accurately, but the Company accrues liabilities for these matters if the Company has determined that it is probable a loss has been incurred and the loss can be reasonably estimated. While it is not possible to predict the outcome of such proceedings, if one or more of them were decided against us, the Company believes there would be no material impact to its consolidated financial statements. Except as described below, there have been no material changes in the Company’s commitments and contingencies from those disclosed in the 2023 Form 10-K or in the Company’s quarterly reports on Form 10-Q for the periods ended March 31, 2024 and June 30, 2024.

Unconditional Purchase Obligations

The Company entered into new transportation agreements related to the Petroleum Segment during the third quarter of 2024, and as of September 30, 2024, the Company’s future minimum required payments for all unconditional purchase obligations as defined in FASB ASC Topic 440, Commitments, are as follows:

Crude Oil Supply Agreement

The Petroleum Segment has a crude oil supply agreement with Gunvor USA LLC (“Gunvor”), which commenced on January 1, 2024 (as amended, the “Gunvor Crude Oil Supply Agreement”), pursuant to which Gunvor supplies the Petroleum Segment with certain crude oil and intermediation logistics helping to reduce the amount of inventory held at certain locations and mitigate crude oil pricing risk. The Gunvor Crude Oil Supply Agreement replaced a similar agreement with a different supplier that expired on December 31, 2023. Volumes contracted under these agreements, as a percentage of the total crude oil purchases (in barrels), were approximately 21% and 23% for the three months ended September 30, 2024 and 2023, respectively, and 21% and 24% for the nine months ended September 30, 2024 and 2023, respectively. The Gunvor Crude Oil Supply Agreement, which currently extends through January 31, 2026, is subject to automaticone-year renewals following the expiration of the initial term in the absence of either party providing 180 days’ notice of termination.

As part of the transition of the crude oil supply agreement from Vitol to Gunvor, on December 31, 2023, the Company purchased the final inventory remaining under the crude oil supply agreement with Vitol and sold it to Gunvor on January 1, 2024. The inventory purchased from Vitol was included within Inventories on the Condensed Consolidated Balance Sheets as of December 31, 2023.

45Q Transaction

Under the agreements entered into in connection with the 45Q Transaction, the Company’s indirect subsidiary CRNF is obligated to meet certain minimum quantities of carbon oxide supply each year during the term of the agreement and is subject to fees of up to $15 million per year (reduced pro rata for partial years) to the unaffiliated third-party investors, subject to an overall $45 million cap, if these minimum quantities are not delivered. CVR Partners issued a guarantee to the unaffiliated third-party investors and certain of their affiliates involved in the 45Q Transaction of the payment and performance obligations of CRNF and CVRP JV, which include the aforementioned fees. This guarantee has no impacts on the accounting records of CVR Partners unless the parties fail to comply with the terms of the 45Q Transaction contracts.

Renewable Fuel Standard

Coffeyville Resources Refining & Marketing, LLC (“CRRM”) and Wynnewood Refining Company, LLC (“WRC”, and together with CRRM, the “obligated-party subsidiaries”) are subject to the RFS implemented by the U.S. Environmental Protection Agency (the “EPA”), which requires obligated parties to either blend renewable fuels into their transportation fuels or purchase renewable fuel credits, known as RINs, in lieu of blending. The Petroleum Segment’s obligated-party subsidiaries are not able to blend the majority of their transportation fuels with renewable fuels and, unless their RFS obligations are waived or exempted, must either purchase RINs or obtain waiver credits for cellulosic biofuels in order to comply with the RFS. Additionally, the Petroleum Segment’s obligated-party subsidiaries purchase RINs generated from our renewable diesel operations, whose operating results are not included in either of our reportable segments, to partially satisfy their RFS obligations.

The Company’s obligated-party subsidiaries recognized an expense of $86 million and a benefit of $135 million for the three months ended September 30, 2024 and 2023, respectively, and an expense of $65 million and a benefit of $99 million for the nine months ended September 30, 2024 and 2023, respectively, for their compliance with the RFS (based on the 2020 through 2024 renewable volume obligation (“RVO”), for the respective periods, excluding the impacts of any exemptions or waivers to which the Company’s obligated-party subsidiaries may be entitled). The recognized amounts are included within Cost of materials and other in the Condensed Consolidated Statements of Operations and represent costs to comply with the RFS obligation through purchasing of RINs not otherwise reduced by blending of ethanol, biodiesel, or renewable diesel. At each reporting period, to the extent RINs purchased and generated through blending are less than the RFS obligation (excluding the impact of exemptions or waivers to which the Company may be entitled), the remaining position is valued using RIN market prices at period end for each specific or closest vintage year. As of September 30, 2024 and December 31, 2023, the Company’s obligated-party subsidiaries’ RFS positions were approximately $374 million and $329 million, respectively, and are recorded in Other current liabilities in the Condensed Consolidated Balance Sheets.

Litigation

Call Option Coverage Case – The lawsuits involving the Company and certain of its affiliates (the “Call Defendants”) and the Company’s primary and excess insurers (the “Insurers”) relating to insurance coverage for settlement by the Call Defendants of the consolidated lawsuits filed by purported former unitholders of CVR Refining, LP (“CVR Refining”) on behalf of themselves and an alleged class of similarly situated unitholders relating to the Company’s exercise of the call option under the CVR Refining Amended and Restated Agreement of Limited Partnership remain pending, with mediation scheduled for November 2024. While these cases remain pending, the Company does not expect their outcome have a material adverse impact on the Company’s financial position, results of operations, or cash flows.

RFS Disputes – WRC has filed petitions for small refinery exemptions (“SREs”) for the 2017 through 2024 compliance periods, which petitions are in various stages of review by the EPA and/or various courts.

Regarding WRC’s petitions for the 2017 to 2021 compliance periods which, together with the SRE petitions from certain other small refineries, had been denied by the EPA in 2022 (the “2022 Denials”), the EPA has yet to act on those petitions after the EPA’s denials were vacated by the United States Court of Appeals for the Fifth Circuit (the “Fifth Circuit”) in November 2023 and remanded back to the EPA on the grounds that the EPA’s denials were impermissibly retroactive and that the EPA’s interpretation was contrary to law and arbitrary and capricious as applied to petitioners’ exemptions. In May 2024, the EPA and certain biofuels groups sought certiorari before the Supreme Court of the United States (“SCOTUS”) seeking review of whether venue for these challenges to the 2022 Denials lies exclusively in the United States Court of Appeals for the District of Colombia Circuit (the “DC Circuit”), which certiorari was granted in October 2024. Oral argument is expected sometime in 2025.

In July 2024, the United States Court of Appeals for the District of Colombia Circuit (the “DC Circuit”) ruled in favor of certain small refineries also challenging the 2022 Denials, holding that the 2022 Denials as applicable to those small refineries was arbitrary and capricious, vacating such denials and remanding such petitions back to the EPA. The DC Circuit also dismissed a challenge brought by biofuel producers to the EPA’s alternative compliance action, concluding that the petitioners had not established any harm from EPA’s decision and therefore lacked standing to sue. WRC’s SRE petition for the 2022 compliance period, which was denied by the EPA in July 2023 largely on the same grounds as the 2022 Denials, remains stayed until issuance of the mandate in the DC Circuit case.

WRC’s lawsuit filed suit in the United States District Court for the Southern District of Texas seeking, among other relief, a declaration that the Administrator of the EPA violated the Clean Air Act by failing to timely rule on WRC’s SRE petition for the 2023 compliance period within 90 days following receipt and compelling the Administrator to rule on WRC’s 2023 SRE petition by an expeditious date certain, remains pending. Similarly, the EPA has not yet ruled on WRC’s petition for the 2024 compliance period, which ruling is due before the end of 2024.

As these matters are in various stages, the Company cannot yet determine at this time the outcomes of these matters. While we intend to prosecute these actions vigorously, if these matters are ultimately concluded in a manner adverse to the Company, they could have a material effect on the Company’s financial position, results of operations, or cash flows.

Guaranty Dispute – During a mediation conducted in September 2024, Exxon Mobil Corporation (“XOM”) formally demanded, pursuant to a guaranty claimed by XOM to have been issued in its favor in 1993 by a subsidiary of CVR Energy, that such subsidiary defend and indemnify it against claims by numerous property owners in Louisiana alleging contamination from historic well operations. The Company disputes the validity of the alleged guaranty and has filed suit in the Superior Court of the State of Delaware for declaratory judgment relating thereto, which suit remains pending. As this matter remains in its early stages, the Company cannot yet determine whether its outcome will have a material adverse impact on the Company’s financial position, results of operations, or cash flows.

(14) Business Segments

CVR Energy’s revenues are primarily derived from thetwo reportable segments: Petroleum and Nitrogen Fertilizer. The Company evaluates the performance of its segments based primarily on segment operating income (loss) and Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”). For the purposes of the business segments disclosure, the Company presents operating income (loss) as it is the most comparable measure to the amounts presented on the Condensed Consolidated Statements of Operations. The other amounts reflect renewable fuels transactions, intercompany eliminations, corporate cash and cash equivalents, income tax activities, and other corporate activities that are not allocated or aggregated to the reportable segments.

The following table summarizes certain operating results and capital expenditures information by segment:

The following table summarizes total assets by segment:

(1)Capital expenditures are shown exclusive of capitalized turnaround expenditures.

(15) Supplemental Cash Flow Information

Cash flows related to income taxes, interest, leases, capital expenditures and deferred financing costs included in accounts payable were as follows:

(1)Capital expenditures are shown exclusive of capitalized turnaround expenditures.

Cash, cash equivalents and restricted cash consisted of the following:

(1)Funds reserved for the redemption of the 2025 Notes in February 2024. See Note 8 (“Long-Term Debt and Finance Lease Obligations”) for further discussion.

(2)Restricted funds were released and paid in February 2024.

(16) Related Party Transactions

Activity associated with the Company’s related party arrangements for the three and nine months ended September 30, 2024 and 2023 is summarized below:

(1)Sales to related parties, included in Net sales in our Condensed Consolidated Statements of Operations, consists of CO sales to a CVRP JV subsidiary.

(2)Purchases from related parties, included in Cost of materials and other in our Condensed Consolidated Statements of Operations, represents reimbursements for crude oil transportation services incurred on the Midway JV through the intermediary purchasing agent.

(3)See below for a summary of the dividends paid to IEP during the nine months ended September 30, 2024 and year ended December 31, 2023.

Dividends to CVR Energy Stockholders

Dividends, if any, including the payment, amount and timing thereof, are determined at the discretion of the board of directors of the Company (the “Board”). IEP, through its ownership of the Company’s common stock, is entitled to receive dividends that are declared and paid by the Company based on the number of shares held at each record date. The following tables present quarterly and special dividends paid to the Company’s stockholders, including IEP, during 2024 and 2023 (amounts presented in table below may not add to totals presented due to rounding):

No dividends were declared for the third quarter of 2024.

Distributions to CVR Partners’ Unitholders

Distributions, if any, including the payment, amount and timing thereof, and the board of directors of CVR Partners’ general partner’s (the “UAN GP Board”) distribution policy, including the definition of available cash, are subject to change at the discretion of the UAN GP Board. The following tables present quarterly distributions paid by CVR Partners to CVR Partners’ unitholders, including amounts received by the Company, during 2024 and 2023 (amounts presented in tables below may not add to totals presented due to rounding):

For the third quarter of 2024, CVR Partners, upon approval by the UAN GP Board on October 28, 2024, declared a distribution of $1.19 per common unit, or $13 million, which is payable November 18, 2024 to unitholders of record as of November 8, 2024. Of this amount, CVR Energy will receive approximately $5 million, with the remaining amount payable to public unitholders.